Application for Mining Licence at Tongo Project

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1 April 2015

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

Application for Mining Licence at Tongo Kimberlite Project, Sierra Leone

Stellar Diamonds plc, the London listed (AIM: STEL) diamond development company focused on West Africa, announces that it has commenced the application process for a mining licence at its 100% owned 1.45 million carat Tongo Dyke-1 kimberlite project in eastern Sierra Leone ("Tongo"). This is as a result of the Company's decision to fast-track Tongo to production following recent positive resource definition work, mining studies and financial modelling undertaken by Paradigm Project Management ("PPM").

Highlights:

· Acceleration of the Tongo project, saving shareholder funds and reducing the time to production

· PPM to consolidate and update all previous technical reporting into a single Preliminary Economic Assessment ("PEA")

· Attractive economics for surface mining concurrent with underground mine development

· Estimated pre-tax NPV(10) and IRR of US$75 million and 55% respectively (120cpht and US$270/ct)

· Significant potential NPV and IRR upside using higher resource grade of 165cpht and US$270/ct

· Target of 120,000 carats production via surface mining in first 3 years

· Target of over 1 million carats mined in estimated 16 year mine life

· Low capital expenditure estimated at US$20 million to bring mine into production

· Funding primarily by debt structures being targeted

· Favourable response received from Sierra Leone stakeholders for decision to accelerate Tongo towards mine development

Chief Executive Karl Smithson commented:

"Moving Tongo to the mining licence application stage is a major milestone for the project. Having recently defined a faster route to production cash flow by the assessment of surface mining studies and based on the extensive resource and financial modelling completed to date, Tongo has clear economic potential. The application for a mining licence will be accompanied by updated mining and financial reports under a Preliminary Economic Assessment instead of a previously planned Definitive Feasibility Study in order to cut costs and seek to fast-track Tongo to production. Simultaneous to this we intend to establish a suitable financing structure to access debt funding for the majority of the US$20 million of capital expenditure which is estimated to be required to bring the project into production.

"We are delighted at the positive response received from various stakeholders within Sierra Leone. There is a clear will to support our efforts to build the next diamond mine in Sierra Leone, which can offer a significant and positive contribution to the post-Ebola social and economic reconstruction. We look forward to the full support of the Sierra Leonean Government in assisting our efforts."

Mine Lease Application

Stellar has decided to accelerate the Tongo project to the mining licence application stage. Previously it has been announced that the Company would seek to undertake a definitive feasibility study. However, given the nature and consistency of the Tongo orebody, the Board has decided to engage PPM to consolidate and update all previous technical reporting into a single PEA. This decision is designed to save shareholder funds and reduce the time taken to get the mine into production. The PEA will include an updated mine plan for both surface and underground mining, re-budgeting of all previous operating and capital expenditure figures and the generation of an up to date financial model to support a mining licence application with the Government of Sierra Leone and proposals for project debt finance.

CEO Karl Smithson recently met with various stakeholders in Freetown, including the Ministry of Mines, and received a very favourable response to the decision to accelerate Tongo toward mine development through the existing channels as defined in the Mines Act of 2009, which includes the following required steps:

- Publication of updated technical and financial reports

- Publication of an Environmental and Social Impact Assessment ('ESIA')

- Stakeholder public disclosure of events

- Application and approval of the mining licence

- Negotiation of fiscal terms once the mine lease has been approved

PPM has been engaged to undertake the PEA and financial modelling. A group will shortly be appointed to undertake the ESIA in Sierra Leone. The mining licence approval process is expected to be completed within six months, though this time frame may vary.

It is the process in the Mining Act (2009) that the fiscal terms and royalties of any mining licence will only be finalised upon the grant of a mining licence. Accordingly announcements on this will be made as and when applicable.

Tongo Mine - Capital Requirements

In the recent Chairman's interim results statement announced on 27 March 2015 it was announced that up to US$20 million of project finance will be sought to fund the Tongo Dyke-1 mine development, including the reports required for the mining licence application process and the application itself (approximately US$0.5 million). The Board will target debt structures for the majority of the funding requirement in order to minimise dilution to existing shareholders and thereby seek to optimise their exposure to any future cash flows. The process of sourcing and structuring the applicable debt facilities will be on-going during the mine lease application process. Any funding that is secured will be contingent on the mine lease being granted. Further announcements will be made in due course.

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

Although Ebola still persists in certain areas in the west of the Sierra Leone the level of infection is on a downward trend. The area of the Tongo mine has been Ebola free for many months, however strict operating protocols are still in place on the project, in order to ensure the continued health and safety of all employees and surrounding communities.

About Stellar Diamonds plc

Stellar is an AIM quoted (AIM: STEL) West African focused diamond development company that continues trial mining of its Baoulé kimberlite in Guinea, and is intent progressing the 1.45 million carat Tongo Dyke-1 resource in Sierra Leone through to the mine development stage. 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.

About PPM

Paradigm Project Management is a project management and engineering company founded in 2006. PPM is active in the mining, infrastructure and renewable sectors of the economy and focusses on work that spans all phases of concept, prefeasibility and feasibility studies as well as project implementation and operational ramp up. PPM has completed projects in many African countries (including Sierra Leone) and has an extensive client base in the diamonds sector, including Anglo American, De Beers, Gem Diamonds, Rockwell Diamonds, Trans Hex and Lucara Diamonds.  

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