Posting of Circular and Notice of General Meeting

28 October 2016

DiamondCorp plc

AIM share code: DCP & JSE share code: DMC

ISIN: GB00B183ZC46

(Incorporated in England and Wales)

(Registration number 05400982)

(SA company registration number 2007/031444/10)

("DiamondCorp", "the Group" or "the Company")

Posting of Circular and Notice of General Meeting

DiamondCorp, the Southern African diamond mining, development and exploration company, announces that, further to the Company's announcement of 20 October 2016, a circular ("Circular") is being posted to shareholders convening a General Meeting of the Company to be held at the offices of City Group plc, 6 Middle Street, London EC1A 7JA at 11.00 a.m. (UK time, 1.00 p.m. South Africa time) on 16 November 2016.

The purpose of the General Meeting is to:

(i) grant the Directors of the Company the necessary authorities to issue such new Ordinary Shares sufficient to fulfil DiamondCorp's obligations to issue new Ordinary Shares to Rasmala should they opt, pursuant to the terms of the Facility, to convert the outstanding principal amounts under the Facility;

(ii) seek approval of Shareholders, pursuant to Rule 21.1 of the Code, for the repayment of the Facility to Rasmala on an Early Repayment Event and/or the conversion of the Facility into new Ordinary Shares; and

(iii) grant the Directors of the Company increased general authorities to allot and issue further equity securities and to dis-apply statutory pre-emption rights in addition to those required for the purposes of the Facility.

Certain sections of the Chairman's letter from the Circular have been included below. A copy of the Circular will also be available shortly on the Company's website (www.diamondcorp.plc.uk).

Unless otherwise stated, terms and expressions defined in the Circular have the same meaning in this announcement.

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: +27 56 216 1300

Chris Ellis, Interim Non-Executive Chairman

Tel: +44 (0) 20 3151 0970 

UK Broker & Nomad

Panmure Gordon (UK) Limited

Adam James/Karri Vuori/Atholl Tweedie

Tel: +44 20 7886 2500

JSE Designated Advisor

Sasfin Capital (a division of Sasfin Bank Limited)Megan Young

Tel: +27 11 445 8068

SA Corporate Advisor

Qinisele Resources Proprietary Limited

Dennis Tucker/Andrew Brady

Tel: +27 11 883 6358

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR").

Approval of the issue of Ordinary Shares pursuant to the Facility under Rule 21.1 of the City Code on Takeovers and Mergers

and

Notice of General Meeting

1. Introduction

The Company announced on 20 October 2016 that it had entered into a Shariah-compliant secured convertible financing facility with Rasmala, a leading independent investment manager and shareholder in the Company pursuant to which Rasmala will advance to the Company the sum of £700,000 in 2 tranches, being Tranche 1 and Tranche 2 as described in section 3 below.

Further details on the background to the Facility are set out in section 2 below.

It is a condition of the continued availability of the Facility that the Company obtains requisite approval from its shareholders at general meeting to allow the Company to issue the new Ordinary Shares sufficient to fulfil its obligations to issue new Ordinary Shares to Rasmala should they opt, pursuant to the terms of the Facility, to convert the outstanding principal amounts under the Facility. If such resolutions are not passed, Rasmala may, at its option, cancel the Facility and demand immediate repayment in full of any principal sums outstanding thereunder.

Further details as to the terms and conditions of the Facility are set out in sections 3 and 4 below.

2. Background to, and reasons for, the Facility

As Shareholders will be aware from recent announcements made by the Company, the Company has been actively seeking immediate funding to cover working capital requirements to allow the Company to continue to operate as a going concern in the immediate term. The proceeds of the Facility will satisfy the Company's immediate term funding requirement of not less than approximately £500,000, and shall be utilised for working capital purposes.

3. Terms of the Facility

The Facility is structured as a Shariah-compliant commodity murabaha agreement with the option to convert (at the Conversion Price) pursuant to which the Company and Rasmala have agreed to the drawdown by the Company of two tranches under the Facility, for a total principal amount of £700,000. The first tranche in the amount of £400,000, has already been drawn down. The second tranche, in the amount of £300,000, is to be drawn down at the request of the Company subject to the satisfaction of certain conditions. It is anticipated that Tranche 2 will be drawn down in the near term.

The Facility shall terminate and becomes repayable on 15 December 2016 and is convertible, at Rasmala's option and subject to Rasmala giving written notice to the Company, into Ordinary Shares on 15 December 2016 (or earlier in certain circumstances as detailed below) at the equivalent of a 30 per cent. discount to the average daily volume weighted average price of the Ordinary Shares across each trading day from the date of the agreement of the Facility to the date of conversion. The Facility may also be repaid by the Company prior to termination at DiamondCorp's discretion.

Under the terms of the Facility, the Company will pay a mark-up on the commodities underpinning the Facility (whose value is equal to the principal amount drawn down) at an equivalent rate of 15 per cent per annum during the Term (payable in either cash or new Ordinary Shares at Rasmala's discretion). In the event of a delayed payment, the Company must pay a daily delay payment from the due date to the date of actual payment on the overdue amount at a rate of 2 per cent. per annum in addition to the Facility rate of 15 per cent. per annum. This penalty is structured in a Shariah-compliant manner.

The Company is required pursuant to the terms of the Facility to publish a circular on or before 31 October 2016 in order to convene a General Meeting to seek to obtain shareholder approval to increase authorities to a level considered sufficient to fulfil the Company's obligations to issue new Ordinary Shares to Rasmala should they opt, pursuant to the terms of the Facility, to convert the outstanding principal amounts under the Facility.

Rasmala shall be precluded from issuing a conversion notice for any number of new Ordinary Shares as shall (i) exceed the current issued share capital of the Company unless and until increased by way of the passing of the requisite resolutions at a general meeting of the Company; (ii) result in Rasmala holding in excess of 29.99 per cent. of the issued Ordinary Shares of the Company as at the conversion date; and/or otherwise trigger an obligation to make a mandatory offer of the Company.

The outstanding principal amounts of the Facility drawn down by the Company under the Facility may become repayable (in either cash or new Ordinary Shares at Rasmala's discretion) ahead of maturity of the Facility in the event that the Company: (i) has released one or more announcements pursuant to Rule 2.4 of the Code ('the announcement of a possible offer') and/or (ii) has released one or more announcements pursuant to Rule 2.7 of the Code ('the announcement of a firm intention to make an offer'), in each case an announcement in respect of a potential offer or an offer other than the announcement commencing the Formal Sale Process. In the event that either such Rule 2.4 or Rule 2.7 announcements have been released, Rasmala is entitled to elect for the Facility to be repaid in cash, or to exercise its conversion option and be issued with Ordinary Shares (an "Early Repayment Event").

Rasmala shall put in place appropriate confidentiality provisions to ensure that members of its board and staff who, under all applicable rules and regulations, are classified as insiders for the purpose of inside information in relation to the Company are appropriately segregated from the team authorised to deal with the Facility and the arrangements arising thereunder.

An administration fee of £25,000 in respect of Tranche 1 has become payable to Rasmala, and a further administration fee of £25,000 in respect of Tranche 2 will be paid by the Company pro rata to the total amount drawn down under the Facility relative to the total principal amount. The Company shall also reimburse appropriate legal and other costs and expenses incurred.

Tranche 1 is collateralised against 2,800 carats of the Company's current diamond inventory. Tranche 2 is to be collateralised against an additional 2,200 carats, in aggregate, of the Company's future diamond inventory, to be supplied in instalments every week from Lace mine production.

The Murabaha Agreement provides for customary events of default. On and at any time after the occurrence of an event of default, Rasmala may at its absolute discretion by written notice to the Company, declare all outstanding amounts under the Facility to be immediately due and payable, together with any other sums then owed by the Company to Rasmala.

The Murabaha Agreement also provides for the following changes in the Board:

· Euan Worthington, former Chairman of the Company, resigned from the Board, effective on execution of the Murabaha Agreement, but shall remain as an employee of the Company for the immediate future in order to ensure an orderly handover of his responsibilities.

· Chris Ellis, Non-Executive Director of the Company, to be appointed as Independent Interim Non-Executive Chairman. Chris was formally appointed as Independent Interim Non-Executive Chairman on 27 October 2016 and it is currently intended that Mr Ellis' appointment shall be on an interim basis to oversee the Formal Sale Process.

· the Rasmala Representative to be appointed to the Board. Neil McDougall was formally appointed as Non-Executive Director on 27 October 2016

As noted above, it is a condition of the continued availability of the Facility that the Company obtains requisite approval from its shareholders at general meeting to allow the Company to issue the new Ordinary Shares sufficient to fulfil its obligations to issue new Ordinary Shares to Rasmala should they opt, pursuant to the terms of the Facility, to convert the outstanding principal amounts under the Facility.

The Company's existing share authorities (of up to 11,207,667 new Ordinary Shares) are not considered sufficient to satisfy a conversion notice should Rasmala elect to convert the Facility in full into new Ordinary Shares. For this reason the Company is proposing Resolutions 1 and 2 at the General Meeting. The passing of the requisite resolutions are a condition of the Facility.

In addition, the Company is required to obtain Rule 21.1 Approval, as is further described in paragraph 5 below, and accordingly the Company is proposing Resolution 3 at the General Meeting.

Tranche 2 of the Facility cannot be drawn down unless and until the Shareholders have passed Resolutions 1, 2 and 3. Additionally, if Resolutions 1, 2 and 3 are not passed, Rasmala may, at its option, cancel the Facility and demand immediate repayment in full of any principal sums outstanding thereunder. In the absence of any alternative, immediately available funding, this would result in the Company being unable to pay its debts as they fall due, and the Company would be insolvent and a receiver would need to be appointed. Accordingly it is important that Shareholders vote in favour of Resolutions 1, 2 and 3.

4. Future Funding and Formal Sale Process

As also previously announced, and notwithstanding the Facility, the Company currently estimates an additional equity and/or debt financing requirement of approximately £2.5 to £3.0 million in the near term to cover the anticipated cash required to fund operations through to commercial production, although there can be no certainty that the Company will subsequently secure the necessary funding solutions to meet its longer term financial requirements.

Pursuant to the Formal Sale Process, as entered into on 18 October 2016, the Board continues to explore all options available to the Company in parallel with its discussions to secure additional funding, including a corporate transaction such as a merger with or offer for the Group by a third party or a sale of the Group's businesses. As at the date of this document, no such acceptable proposal has been put forward to the Board. The Company has also received early stage expressions of interest in respect of potential additional funding. However, there can be no certainty that any such proposal(s) will be made nor as to the terms on which any such proposal(s) might be made.

Consequently it is the Board's intention at the General Meeting to seek shareholders' approval to provide the Board with increased authorities to allot and issue further equity securities and to dis-apply statutory pre-emption rights in addition to those required for the purposes of the Facility.

5. Rule 21.1 Approval

Pursuant to the Formal Sale Process as announced on 18 October 2016, the Company is now in an "offer period" as defined in the Code. Pursuant to Rule 21.1 of the Code, the Board must not, without the approval of the Shareholders, take any action which may result in any offer or bona fide possible offer being frustrated or in Shareholders being denied the opportunity to decide on its merits or take certain actions, including issuing any shares. The repayment of the Facility to Rasmala on an Early Repayment Event and/or the conversion of the Facility into new Ordinary Shares is deemed to be 'frustrating action' and will therefore require Shareholder approval pursuant to Rule 21.1 of the Code.

In addition, the dealing disclosure requirements under Rule 8 of the Code that apply to shareholders of a company in an offer period also apply. Such requirements are outlined in paragraph 6 below.

6. Dealing disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

7. General Meeting

A notice convening the General Meeting to be held at 6 Middle Street, London EC1A 7JA, at 11:00 a.m. (UK time) and 1.00 p.m. (South Africa time) on 16 November 2016 is set out at the end of this document. At the General Meeting, the following Resolutions will be proposed:

1. an ordinary resolution to grant authority to the Directors to allot new Ordinary Shares or to grant rights to subscribe for or convert any security into shares in the capital of the Company pursuant to section 551 of the 2006 Act up to an aggregate nominal amount of £50,000. The Directors will limit this authority to the issue of any new Ordinary Shares to be issued pursuant to a conversion of the Facility or any part thereof. This authority will expire at the conclusion of the next Annual General Meeting of the Company to be held after the passing of the resolution, or if earlier, 18 months from the passing of the resolution;

2. a special resolution to disapply the statutory pre-emption rights contained in section 561(1) of the 2006 Act in respect of the allotment for cash of new Ordinary Shares with an aggregate nominal amount of up to £50,000. The Directors will again limit this authority to the issue of any new Ordinary Shares to be issued pursuant to a conversion of the Facility or any part thereof. This authority will expire at the conclusion of the next Annual General Meeting of the Company to be held after the passing of the resolution, or if earlier, 18 months from the passing of the resolution;

3. an ordinary resolution to approve the issue of Ordinary Shares pursuant to the Facility, for the purposes of Rule 21.1 of the Code in circumstances where the Company remains in an offer period (as defined in the Code).   

4. an ordinary resolution to grant a general authority, in addition to that granted pursuant to paragraph 1 above, to the Directors to allot shares or to grant rights to subscribe for or convert any security into shares in the capital of the Company pursuant to section 551 of the 2006 Act up to an aggregate nominal amount of £319,160. This authority will expire at the conclusion of the next Annual General Meeting of the Company after the passing of the resolution, or if earlier, 18 months from the passing of the resolution. This authority will be in addition to the authority referred to in Resolution 1; and

5. a special resolution to disapply the statutory pre-emption rights contained in section 561(1) of the 2006 Act in respect of the allotment for cash of equity shares with an aggregate nominal amount of up to £200,000. This authority will expire at the conclusion of the Annual General Meeting of the Company to be held in 2017 after the passing of the resolution, or 18 months from the passing of the resolution. This authority will be in addition to the authority referred to in Resolution 2.

Resolutions 1, 3 and 4 are to be proposed as ordinary resolutions and Resolutions 2 and 5 are to be proposed as special resolutions.

8. Action to be taken

Shareholders will find accompanying this circular a Form of Proxy for use at the General Meeting. Whether or not Shareholders intend to be present at the General Meeting, they are requested to complete, sign and return the Form of Proxy in accordance with the instructions printed on it to Computershare Investor Services plc, at The Pavilions, Bridgwater Road, Bristol, BS13 8AE, UK or to Computershare Investor Services (PTY) Limited at their registered office at 70 Marshall Street, Johannesburg 2001 or P.O. Box 61051, Marshaltown 2017, South Africa, as soon as possible and, in any event, so as to arrive no later than 11:00 a.m. (UK time) and 1.00 p.m. (South Africa time) on 14 November 2016. Completion and return of the Form of Proxy will not affect Shareholders' right to attend and vote in person at the General Meeting if they so wish. Further information regarding the appointment of proxies can be found in the notes to the Notice of General Meeting. In the case of non-registered Shareholders who receive these materials through their broker or other intermediary, the Shareholder should complete and send a letter of direction in accordance with the instructions provided by their broker or other intermediary.

Tranche 2 of the Facility cannot be drawn down unless and until the Shareholders have passed Resolutions 1, 2 and 3. Additionally, if Resolutions 1, 2 and 3 are not passed, Rasmala may, at its option, cancel the Facility and demand immediate repayment in full of any principal sums outstanding thereunder. In the absence of any alternative, immediately available funding, this would result in the Company being unable to pay its debts as they fall due, and the Company would be insolvent and a receiver would need to be appointed. Accordingly it is important that Shareholders vote in favour of Resolutions 1, 2 and 3.

9. Responsibility

The Company and the Directors accept responsibility for the information contained in this Circular. To the best of the knowledge and belief of the Company and the Directors (which has and who have taken all reasonable care to ensure that such is the case) the information contained in this circular for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

10. Directors' Recommendation and Intention

The Directors consider the Resolutions to be proposed at the General Meeting to be in the best interests of the Company and the Shareholders as a whole. Consequently, the Directors unanimously recommend that you vote in favour of the Resolutions, as they intend to do themselves in respect of their beneficial interests amounting, in aggregate, to 10,111,166 Ordinary Shares representing approximately 2.11 per cent. of the Existing Ordinary Shares.

Yours faithfully,

Christopher Ellis

Interim Non-Executive Chairman

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Notes:

(1) If any of the details contained in the timetable above should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.

(2) All times above and throughout the Circular are London times and each of the times and dates are subject to change.

DEFINITIONS

The following definitions apply, unless the context requires otherwise: