AIM-quoted West African diamond miner Stellar Diamonds has conditionally raised approximately £1.85 million through the issue of 148 179 476 new ordinary shares of 1p each at 1.25p per share to new and existing private and institutional investors.

The proceeds of the fundraising will be used predominantly on advancing its Baoulé kimberlite project in Guinea towards trial mining, as well as continuation of the bulk sampling at Tongo Dyke-1 in Sierra Leone, settlement of outstanding fees and for general working capital.

Stellar’s right to earn into the Baoulé project at the diamondiferous Baoulé kimberlite pipe, which is located in the prolific diamond region of Aredor in southeast Guinea were granted under a joint venture agreement in December 2013.  Using an extensive historical database as reference, Stellar has modelled a target resource of over 22 million tonnes to a depth of 300m.  Bulk sampling by previous owners has yielded diamond grades of between 13 and 40 carats per hundred tonnes.  Taking the lower grade of 13cpht, Stellar is targeting a diamond resource of 3 million carats.  In 2000, a 500 carat parcel sold for US$157 per carat which Stellar Diamonds estimates would yield over US$200 per carat in the current diamond market.

Stellar Diamonds intends to allocate funds to accelerate Baoulé to trial mining and is already in the process of relocating its assets from Droujba and Mandala to Baoulé, particularly its MB 100 dense media separation (DMS) plant which is capable of processing large tonnages and recovering large, high value diamonds for which the Aredor area is renowned.  Stellar Diamonds is scheduling commissioning of the plant in August 2014 with trial mine processing commencing in September 2014.

Stellar intends to acquire its 75% interest in the Baoulé project, as per the joint venture agreement, through a combination of past and future expenditure and vending in of various plant and machinery assets before the commencement of the trial mining.

At the Tongo project in Sierra Leone, on-going bulk sampling of the 1.1 million carat Dyke-1 resource continues to yield very high diamond grades with exceptional quality diamonds.  Stellar recently reported recovery of 551 carats at an average bulk sample grade of 126cpht which is in excess of the modelled resource grade of 120cpht.  Stellar will continue with the bulk sampling programme into July 2014, in order to achieve at least a 1,000 carat diamond parcel for the valuation and diamond value modelling that is required for the definitive feasibility study.

Given the tough market conditions for small mineral resources companies, the directors believe that the acceleration of Baoulé to trial mining is the correct strategy to deliver shareholder value as Baoulé has the potential to generate cash flow for the Company during the second half of 2014.  The work at Tongo will continue through the bulk sampling exercise, although completion of the full definitive feasibility study will now be targeted for the first half of 2015.

The cost of the 2014 work programme is estimated at £1.0 million for Baoulé and £0.3 million for Tongo.  Stellar Diamonds will use the remaining £0.55 million raised for corporate, in country and general working capital purposes.

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