Issue of Equity

NOT FOR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES OR ANY OTHER JURISDICTION IF TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION

DiamondCorp plc

JSE share code: DMC & AIM share code: DCP

ISIN: GB00B183ZC46

(Incorporated in England and Wales)

(Registration number 05400982)

(SA company registration number 2007/031444/10)

("DiamondCorp" or "the Company")

Placing to raise up to £2.95million

HIGHLIGHTS

·; The Company has conditionally placed 34,713,796 new ordinary shares at 8.5 pence per share to raise approximately £2.95 million (before expenses);

·; The proceeds of the placing are to be applied to complete the decline development and extraction and processing of a kimberlite mining sample at the Lace mine in South Africa in order to determine a definitive diamond grade, expedite mini-bulk testing of diamondiferous kimberlites in Botswana, meet scheduled debt repayments due in April 2011 and for working capital purposes;

·; The Placing is subject to shareholder approval at a general meeting which will be held on 22 December 2010 at 12:00 pm UK time.

Introduction

The Board of DiamondCorp, the southern African diamond development and exploration company, is pleased to announce that it has conditionally placed up to 34,713,796 New Ordinary Shares at 8.5 pence per share (the "Placing Price") pursuant to the Placing to raise, in aggregate, up to £2.95 million gross proceeds for the Company (approximately £2.77 million net of expenses). The Placing Price represents a discount of 11.7 per cent. to the closing mid-market price of 9.625p on 6 December 2010, being the last practicable date prior to the posting of this announcement.

In April 2010 the Company raised approximately £6.6 million net of expenses at 7p per share to implement the decline development to the -240m level of the Lace kimberlites, undertake drilling of its kimberlite exploration projects in Botswana, pay down loan obligations and for general working capital purposes.

Since recommencing the decline development in May 2010, progress has been close to schedule and budget. However, an independent geotechnical review of the proposed bulk sampling programme has suggested that the -260m level is a better target to take the bulk sample than the -240m level, as access to most areas of the pipe at this level will be unrestricted, allowing for easier and safer sampling methods. This additional 20m of vertical depth requires approximately 140m of additional decline development and adds approximately six weeks to the programme.

The direct cost impact of the change is approximately £450,000. In addition, cost inflation and the impact of the stronger rand has added approximately £300,000 to the original £4 million budget for the decline access, and, in light of the increased focus on risk assessment, an additional £250,000 is now being budgeted for secondary support which may be required in the kimberlite during the bulk sampling programme. The additional 140m of decline development to access the 860 Level adds approximately six weeks to the schedule. On this basis, it is expected that the Company will access the 860 Level at the end of February 2011 and that bulk sampling will be completed by the end of April 2011. The Company has approximately US$1.55 million of loan principal and interest to pay Africa Opportunity Fund LP in April 2011. The Directors consider it prudent to raise additional cash now to cover the additional decline development cost and the April 2011 loan obligations.

The net proceeds of the Placing are expected to be applied as follows:

(i) £1.0 million - completion of the decline development and extraction and processing of a kimberlite mining sample of approximately 30,000 tonnes from the 860 Level in order to determine a definitive diamond grade at the mining level, as detailed above. Full scale production of 1.2 million tonnes per annum from the underground mining operation will require additional capital, currently estimated by the Bankable Feasibility Study and management at £5.3 million not provided for by the Placing.

(ii) £0.5 million - expedite bulk sampling in Botswana. DiamondCorp is earning a 77.5 per cent interest in PL/71 from Botswana company Geoperspectives (Pty) Limited by funding exploration activities. Exploration work in PL/71 during 2009 and 2010 has identified two diamondiferous kimberlite pipes, J-01 (10 ha) and J-05 (1.5 ha). The number of diamonds recovered from initial microdiamond analysis is insufficient for meaningful grade determination, however management are pleased with results and sufficiently encouraged to proceed with mini-bulk testing. £0.5 million of the proceeds will be utilised for mini-bulk testing in PL/71.

(iii) £1.0 million - Loan obligations. The Company currently has a US$3.35 million loan facility with Africa Opportunity Fund LP secured against the Company's South African assets. Approximately £1.0 million of the proceeds of the Placing will be used to meet principal and interest payments on this loan which fall due in April 2011.

(iv) £0.45 million - general working capital purposes.

Details of the Placing and Subscription

The Company is proposing to raise approximately £2.95 million (£2.77 million net of expenses), by way of the Placing of 34,713,796 New Ordinary Shares at the Placing Price. This represents a discount of 11.7 per cent. to the closing mid-market price of 9.625p per Existing Ordinary Share on 6 December 2010, being the latest practicable date prior to the posting of this announcement.

The Placing Agreement is conditional upon, inter alia, (i) a minimum amount of £2.5 million (before expenses) being raised pursuant to the Placing (ii) the Resolutions being duly passed at the General Meeting and (iii) admission of the New Ordinary Shares to AIM and AltX becoming effective on or before 8.00 a.m. and 10.00 a.m. respectively on 23 December 2010 (or such later time and date as the Company, Cenkos Securities and Fairfax may agree, but in any event no later than 18 January 2011). The Placing Agreement contains provisions entitling both Cenkos Securities and Fairfax to terminate the Placing Agreement at any time prior to Admission in certain circumstances. If this right is exercised, the Placing will not proceed. The Placing has not been underwritten.

Conditional on the passing of the Resolutions, application will be made to the LSE and the JSE for the New Ordinary Shares to be admitted to trading on AIM and AltX. It is expected that Admission will become effective and that trading in the New Ordinary Shares will commence on AIM and AltX at 8.00 am UK time on 23 December 2010 (or such later time and date as the Company, Cenkos Securities and Fairfax may agree, but in any event no later than 18 January 2011).

The New Ordinary Shares will, when issued and fully paid, rank equally in all respects with the Existing Ordinary Shares, including the right to receive any dividend or other distribution declared, made or paid after the date of their unconditional allotment.

It is expected that CREST accounts will be credited on the day of AIM Admission and that share certificates (where applicable) will be despatched within 14 days of AIM Admission. Application will be made to the London Stock Exchange, for the New Ordinary Shares to be admitted to trading on AIM and to the JSE, for the New Ordinary Shares to be admitted to trading on AltX. It is expected that the AIM Admission will become effective and that dealings in the Placing Shares will commence at 8.00 a.m. (UK time) on 23 December 2010, and the AltX Admission will also become effective and that dealings in Placing Shares will commence at 10:00 a.m. (UK time) on 23 December 2010.  

If the Resolutions are not passed by the Shareholders, then the Placing will not proceed and the Company will not have sufficient financial resources to complete its bulk sampling programme to determine a definitive diamond grade or to meet its debt obligations.

Related Parties

European Islamic Investment Bank Plc ("EIIB") which holds 26.48% of the ordinary share capital of the Company prior to the Placing is considered a related party under the AIM Rules due the size of its holding. EIIB has subscribed for 9,340,342 shares at the Placing Price as part of the Placing. George Morton is a non-executive director of EIIB. The other Directors of the Company consider, having consulted with Cenkos Securities plc, the Company's Nominated Adviser, that the terms of this transaction with EIIB are fair and reasonable insofar as the Company's shareholders are concerned.

Application will be made to the LSE, for the Placing Shares to be admitted to trading on AIM and to the JSE, for admission to trading on AltX and it is expected that admission will occur at 8.00 a.m. (UK time) on 23 December 2010.

All definitions in this announcement are the same as those in the circular posted to shareholders today, 7 December 2010.

Circular

A circular has today been posted to shareholders setting out the details of the Placing and convening a General Meeting of the Company. A copy will be made available on the Company's website at www.diamondcorp.plc.uk

Pursuant to Section 571 of the Act, the Directors consider that the Placing and the Resolutions are in the best interests of the Company and its Shareholders as a whole, for the reasons set out above, and unanimously recommend that you vote in favour of the Resolutions, as they have irrevocably undertaken (to the extent applicable) to do in respect of their own beneficial holdings amounting, in aggregate, to 2,918,561 Ordinary Shares, which represents approximately 1.96 per cent. of the Company's Existing Ordinary Shares.

Advisors

Nominated Advisor: Cenkos Securities plc

AIM Brokers: Cenkos Securities plc, Fairfax I.S. PLC

JSE Sponsor: PSG Capital (Pty) Limited

For further information, please contact:

DiamondCorp plc

Paul Loudon, Chief Executive +44 20 3151 0970

Cenkos Securities plc

Ivonne Cantu / Liz Bowman / Will Dymott +44 20 7397 8900

Fairfax I.S. PLC

Ewan Leggat +44 207 598 5368

PSG Capital (Pty) Limited

John-Paul Dicks +27 21 887 9602

Russell & Associates

Charmane Russell/Marion Brower +27 11 880 3924