Stellar Diamonds has signed a legally binding conditional Tribute Mining Agreement and Revenue Share Agreement with Octea Mining Ltd in respect of the Tongo-Tonguma kimberlite diamond project in eastern Sierra Leone. Background and highlights of the agreements and the project:

• Deal creates the potential for substantial near and long term cash flows for Stellar
• Project hosts one of the highest value kimberlite ore bodies in Africa on a dollar/t basis and would create the second largest kimberlite diamond mine in West Africa
• Agreements allow for mining the combined and contiguous Tongo and Tonguma concessions
• Robust attributable potential post-tax project NPV(8) and IRR of $104 million and 31% respectively
• Modest mine development CAPEX in first two years estimated at $32 million (including 15% contingency)
• Estimated 21 year mine life, producing over 4.5 Mct with estimated revenues over $1.5 billion
• Project at full production estimated to generate $45 million gross revenue per annum(2.2 Mct/y at a weighted average value of $229/ct
• Resource statements, mine plan, financial model, CPR, all completed by independent consultants
• 10% share of gross revenues (after deduction of Government royalty) payable to Octea on diamond and other minerals recovered and sold, once Stellar has recouped an amount equal to its CAPEX investment and Octea has received an initial revenue share payment of $5 million
• Stellar to make a one-off payment of $5.5 million to Octea five years after project mine development commences
• On completion, Stellar will acquire a 50 t/h kimberlite processing plant from Octea for a nominal amount in order to fast track production
• Stellar’s has invested $7.2 million to date on establishing resources at Tongo, equivalent to some £0.14 per Stellar share.

Chief Executive Karl Smithson commented: “We are delighted to have signed these agreements with Octea which, subject to completion, will allow Stellar to build a single mine for the simultaneous commercial production from the contiguous Tongo (Stellar) and Tonguma (Octea) kimberlite deposits. The combined project has an initial 4.5 Mct resource which, due to the high grade (100 to 260 ct/100 t at +1.18 mm) and high quality diamonds ($209/ct to $310/ct), is considered to be one of the highest value kimberlite orebodies in Africa on a dollar per tonne basis. The 21 year mine plan with a consistent output of over 200,000 ct/y at full production would quantify this development as the second largest kimberlite diamond mine in West Africa. The project also has a very modest two year capital requirement of just under $32 million to get into full scale commercial production. Stellar has the strong support of all main stakeholder groups in Sierra Leone for this mine development, which would have a very positive impact in terms of employment, local infrastructure development and future taxation revenue for the country.”