July 30, 2013

PLACING OF SHARES

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

30 July 2013

Stellar Diamonds plc

(“Stellar” or the “Company”)

PLACING OF SHARES

Stellar Diamonds plc, the London quoted (AIM: STEL) diamond mining and exploration company focused on West Africa, announces that the Company is raising approximately £0.94 million (gross) through a conditional placing of 94,275,000 ordinary shares (the “Placing Shares”) to institutional and other investors at a price of 1.00p per share.

The Placing is conditional upon, inter alia, the passing of the Resolutions at the Company’s General Meeting proposed to be convened for 16 August 2013 and Admission becoming effective. The Placing is also conditional on the Placing Agreement made between the Company, Charles Stanley and Daniel Stewart becoming unconditional and not being terminated in accordance with its terms.

Karl Smithson, Chief Executive of Stellar, commented:

“We are pleased with the level of existing and new investor support which gives the Company the financial capacity to both increase the 1 million carat Dyke-1 resource at Tongo and advance it through feasibility study and hopefully towards a positive production decision. I look forward to updating Shareholders on progress over the coming months.”

Reasons for, and details of, the Placing and use of funds

On 24 July 2013, the Company announced the results of the conceptual economic scoping studies on Tongo and Droujba by the independent consulting company Paradigm Project Management (“PPM”). Following the completion of these studies, the Board also announced that it had decided that the Company will focus on progressing the Tongo project through feasibility study and towards a production decision. As part of this process, the Company will undertake a programme of drilling, bulk sampling and feasibility studies over the Tongo Dyke-1 kimberlite and also evaluate adjacent diamondiferous kimberlites to enhance the overall diamond resource base. The objective is to complete the feasibility study within the next 12 months to enable a production decision to be made.

On 24 July 2014, in conjunction with the announcement that the Company had raised net proceeds of £551,876 from the Directors and other investors, the Company also confirmed that further funding would be required to fully implement the Company’s strategy of taking Tongo through feasibility to reach a production decision. The Company also confirmed that it was in discussions with potential investors with regard to providing additional funding. Following these discussions, the Board has decided to raise approximately $1.45 million (c.£0.94 million), before expenses, through a placing of the Placing Shares at the Placing Price to institutional and other investors. The net proceeds of the Placing are estimated to be approximately £0.84 million.

The funds raised will be used to:

  • allow the company to progress with the feasibility work on Tongo, including the drilling programme and bulk sampling;
  • provide for the on-going care and maintenance at its Droujba and Mandala projects ;
  • assist the Company in its ongoing dispute with the Ministry of Mines in Sierra Leone at Kono; and
  • fund the General ongoing working capital needs of the Company.

The Placing Shares will be issued credited as fully paid and will rank pari passu in all respects, 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 to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in the Placing Shares will commence on 20 August 2013. Following Admission, the total issued share capital of the Company will be 492,571,076 Ordinary Shares. No application has been or is being made for the Placing Shares to be admitted to any other recognised investment exchange.

In addition, each Placee will, subject to the required shareholder approval being granted at the forthcoming General Meeting, be issued with unlisted one year warrants exercisable at 2 pence per Ordinary Share on the basis of one Placing Warrant for each Placing Share subscribed.

No application is being made to the London Stock Exchange for the Placing Warrants (and the Previous Placing Warrants) to be admitted to trading on AIM and the Placing Warrants and the Previous Placing Warrants will not be admitted to AIM.

The Placing together with issue of the Placing Warrants (and the Previous Placing Warrants) are conditional, inter alia, upon:

  • the Resolutions being passed at the General Meeting;
  • the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and
  • Admission.

General Meeting

For the Placing to proceed, Shareholder approval is required at the General Meeting to give the Directors authority to allot the Placing Shares and the Placing Warrants by specifically granting them the authority to allot the Placing Shares, grant the Placing Warrants and to empower them to disapply pre-­emption rights in respect thereof. The issue of the Placing Shares and the Placing Warrants will be conditional on the passing of Resolutions 1 and 3 as set out in the Notice of GM.

Shareholder approval will also be sought for the grant of the Previous Placing Warrants which were offered to Directors and other third party investors as part of the placing by the Company announced on 24 July 2013.

The Directors are also seeking authorisation to allot additional equity securities on a non pre­-emptive basis up to 10 per cent. of the Company’s existing issued share capital to allow the Directors the ability to issue further new Ordinary Shares for general working capital purposes, although there is no current intention to use this authority.

The General Meeting will be held at 10.00 a.m. on 16 August 2013 at the offices of Stellar at Burleigh House, 355-359 Strand, London WC2R 0HS. At the General Meeting, the following Resolutions will be proposed:

  1. An ordinary resolution to authorise the Directors to allot Relevant Securities in relation to the issue of the Placing Shares, the Placing Warrants, the Previous Placing Warrants and the additional headroom required should any further shares be issued pursuant to resolution 4 below;
  2. A special resolution to empower the Directors to disapply Shareholders’ statutory pre-emption rights in relation to the issue of the Previous Placing Warrants;
  3. A special resolution authorising the Directors to allot the Placing Shares and the Placing Warrants without the Company having first to offer those shares to existing Shareholders in accordance with their pre-emption rights under the Companies Act 2006; and
  4. A special resolution to empower the Directors to disapply Shareholder’s statutory pre­-emption rights over of up to 10 per cent. of the Company’s existing issued share capital prior to the Company’s next annual general meeting.

If the Resolutions in the Notice of GM are not passed by Shareholders and/or the Placing does not become unconditional, the Directors believe it is unlikely that the Group would be able to progress in a meaningful manner the planned feasibility work on Tongo. It would have to continue to try and source the required funds from alternative sources of finance or through joint venture partners. Furthermore, once the proceeds of the fund raise announced on 24 July are utilised, it would have to cease operations on its projects and put them onto care and maintenance programmes.

Total voting rights

Following Admission, the Company’s total issued share capital will comprise of 492,571,076 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 492,571,076. 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.

About Stellar Diamonds plc

Stellar is a London (AIM: STEL) quoted West African focussed diamond mining and exploration company which is advancing the 1 million carat Tongo Dyke-1 resource into feasibility studies and towards production. 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 seeking to settle the issue amicably and through diplomatic channels, and will pursue legal remedies if required 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 ExecutiveTel: +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

DEFINITIONS

“Act” the Companies Act 2006, as amended
“Admission” the admission of the Placing Shares pursuant to the Placing to trading on AIM following completion of the Placing and such admission becoming effective in accordance with the AIM Rules
“AIM” a market operated by the London Stock Exchange
“AIM Rules” The AIM Rules for Companies as published by the London Stock Exchange from time to time, including where appropriate the AIM Rules for Nominated Advisers
“Board” or the “Directors” the directors of the Company, as at the date of this document, whose names are set out on page 6 of this document
“Broker Placing” the conditional placing by Charles Stanley and Daniel Stewart as agents for the Company of 28,850,000 Placing Shares at the Placing Price, pursuant to the provisions of the Placing Agreement
“Charles Stanley” Charles Stanley Securities, acting as the Company’s Nominated Adviser and Joint Broker
“Company” or “Stellar” Stellar Diamonds plc, a company incorporated in England and Wales under registered number 5424214
“Company Placing” the conditional placing by the Company of 65,425,000 Placing Shares at the Placing Price with investors pursuant to the provisions of the Company Placing Letters
“Daniel Stewart” Daniel Stewart & Company plc, acting as the Company’s Joint Broker
“Enlarged Issued Share Capital” the issued share capital of the Company immediately following admission to AIM of the Placing Shares
“Existing Ordinary Shares” the 398,296,076 ordinary shares of 1p each in issue as at the date of this document
“General Meeting” or “GM” the General Meeting of the Company convened for 10.00 a.m. on 16 August 2013 or any adjournment thereof
“London Stock Exchange” London Stock Exchange plc
“Ordinary Shares” ordinary shares of one penny each in the capital of the Company
“Placing” the Broker Placing and the Company Placing
“Placing Agreement” the conditional agreement dated 30 July 2013 relating to the Placing between (1) the Company, (2) Charles Stanley and (3) Daniel Stewart
“Placing Price” 1.00p per new Ordinary Share
“Placing Shares” the 94,275,000 new Ordinary Shares proposed to be issued by the Company pursuant to the Placing and whose allotment and issue is conditional, inter alia, on the passing of the Resolutions
“Placing Warrants” the 94,275,000 warrants to subscribe for new Ordinary Shares to be issued to the Placees pursuant to the Placing exercisable at 2 pence per Ordinary Share at any time up until the first anniversary of the date of Admission
“Previous Placing Warrants” The 61,823,036 warrants to subscribe for new Ordinary Shares to be issued to the Directors and other third party investors, conditional on shareholder approval, pursuant to the placing announced by the Company on 24 July 2013, exercisable at 2 pence per Ordinary Share at any time up until the first anniversary of grant
“Resolutions” the resolutions to be proposed at the GM as set out in the Notice of GM
“Shareholders” holders of Existing Ordinary Shares, or new Ordinary Shares, as the case may be, from time to time