30 October 2014

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")

Lace Diamond mine Project update

DiamondCorp, the Southern African Diamond development and exploration company, is pleased to provide the following update on the underground development and tailings re-treatment activities at the Lace Diamond mine in the Free State province of South Africa.

Highlights

·      The development work into Upper K4 (UK4) mining block continues to be on schedule for commencement of mining operations in H1 2015.

·      Members of the Association of Mineworkers and Construction Union (AMCU) commenced industrial action at the Lace Mine last week, however development work is continuing in the UK4 block with non-AMCU employees.

·      The AMCU strike is in regard to its demand for the appointment of two full-time salaried shop stewards. However, the Company notes that AMCU already have five appointed shop stewards at the Lace Mine.

·      It is estimated that for every two weeks the strike continues, it will add one week to the development timetable.

·      The strike action has highlighted inefficiencies in work place practices which will be investigated and addressed when the striking workers return as development productivity has improved 87% per person per shift since the strike commenced.

·      Mine development costs to date are averaging R39,135 per metre against a budget of R37,000 per metre.

·      Workplace safety remains a priority for the Company, and the Lace project has been awarded its first 1,000 fatality-free shift trophy by the SA Mine Health and Safety Council.

·      Installation of the underground conveyor belt system is unaffected by the industrial action and is on schedule to be used for mining of the UK4 block.

·      Underground drilling and bulk testing of the UK4 block remains on schedule for the release of an updated resource statement in Q1 2015.

·      Mining of tailings halted during the three months to 30 September 2014 while the surface earth moving fleet completed the construction of an additional water storage dam.

·      Diamond recoveries from tailings for the nine months ended 30 September  totalled 17,981 carats at a recovered grade of 5.94 carats per hundred tonnes (cpht) against a budget of 5.00 cpht.

·      Diamond sales for the nine months to 30 September 2014 totalled 16,505 carats at an average price of US$65 per carat.

·      Beneficiation of the 15.2 carat Diamond recovered from the tailings in July has been completed and the two brilliant cut diamonds (5.33 carats and 2.07 carats) are ready for sale.

Underground Development

During the three months ended 30 September 2014, the Company's 74%-owned subsidiary Lace Diamond Mines (Pty) Limited (LDM) commenced implementation of a revised underground development schedule and budget which aims to bring forward the ramp up of commercial production from underground kimberlite mining by six months into H1 2015. The accelerated mining development is being financed from within existing project finance facilities.

Tunnel development costs to date are averaging R39,135/m against a revised budget of R37,000/m. The over spend continues to be the result of increased operating costs on the Company's underground mining fleet. However, cost saving initiatives, including the introduction of chains to the tyres of the underground loaders and computerisation of maintenance scheduling, are starting to show a positive impact which should be reflected in improvements in the cost per metre rate going forward. The overall mine development expenditure is within budget.

Workplace safety remains a priority for the Company, and the Lace project has been awarded its first 1,000 fatality-free shift trophy by the SA Mine Health and Safety Council.

Underground drilling and bulk testing of the UK4 block remains on schedule for the release of an updated resource statement in Q1 2015.

AMCU strike action

AMCU m embers employed at Lace commenced strike action on 23 October 2014 as a consequence of management's refusal to employ two full-time salaried shop stewards. The Commission for Conciliation, Mediation and Arbitration has granted AMCU a certificate for the strike, which means it is a legal and protected strike under the South African Labour Relations Act. However, the 'no work, no pay' rule will apply. AMCU is the majority union at the Lace mine and already has five appointed shop stewards in the workforce.

Until such time as the strike ends, development tunnelling in the UK4 mining block and processing of development kimberlite will continue with non-AMCU members.

The first week of the strike has highlighted certain workplace inefficiencies which will be investigated and addressed when the striking workers return. Year to date productivity on development tunnelling prior to the strike action was 1.57 tonnes per person per shift with three crews. Productivity since the strike commenced is 2.87 tonnes per person per shift with one crew, an improvement of 87% per person.

It is estimated that for every two weeks the strike continues, it will add approximately one week to the development timetable. Installation of the underground conveyor belt is unaffected by the strike action and is scheduled to be commissioned in H1 2015 in time for mining of the UK4 block.

Tailings retreatment

In the three months ended 30 September 2014, a decision was taken to stop tailings re-treatment processing to allow the surface earth moving fleet to complete the construction of another 150,000 cubic metre surface process water storage dam in preparation for earlier than scheduled kimberlite mining. This activity was successfully completed in the dry winter months ahead of the summer rains. Water pumped from underground provides around 55% of the Lace processing plant requirement, with the balance coming from surface rainwater runoff.

All final modifications to the plant have been completed for treatment of development kimberlite from the UK4 block, which is now being trucked to surface.

Diamond sales for the nine months ended 30 September totalled 16,505 carats for proceeds of $1,072,212. The average year to date sales price of $65 per carat is 5% above our forecast for the year.

The 15.2 carat Diamond recovered from the dumps in July was sold into the Company's Johannesburg beneficiation joint venture at $5,000 per carat. The stone yielded two brilliant cut diamonds of 5.33 carats and 2.07 carats which are currently awaiting sale. The Company will receive 50% of the profit from the sales of the polished gems.

Short-term demand for rough diamonds has softened in response to slower polished sales and tightening liquidity as a number of banks which finance the cutting and polishing sector have moved to reduce their exposure to the sector. Longer-term, the outlook remains strong as world economies continue to recover.

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: +27 56 216 1300

Euan Worthington, Chairman

Tel: +44 7753 862 097

UK Broker & Nomad

Panmure Gordon (UK) Limited

Dominic Morley/Adam James

Tel: +44 20 7886 2500

JSE Designated Advisor

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

Tel: +27 11 445 8068