AIM admission document - Stellar Diamonds Plc

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this documentor as to the action you should take, you should immediately to seek your own personal financial advice from your stockbroker, bank manager, solicitor,accountant, fund manager or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are resident inthe United Kingdom or, if you are not resident in the United Kingdom, from another authorised independent adviser.If you have sold or transferred all of your Existing Ordinary Shares in the Company, please forward this document at once, together with the accompanying Formof Proxy to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to thepurchaser or transferee. If you have sold or transferred some of your Existing Ordinary Shares in the Company, please consult the stockbroker, bank or other agentthrough whom the sale or transfer was effected.This document, which comprises an AIM Admission document drawn up in accordance with the AIM Rules, has been issued in connection with the proposedadmission to trading of the enlarged issued share capital of the Company to trading on AIM, a market operated by London Stock Exchange plc. This documentdoes not constitute a ‘prospectus’ for the purposes of the Prospectus Rules.Application will be made to London Stock Exchange plc for the Consolidated Ordinary Shares, the Consideration Shares and the Placing Shares to be admittedto trading on AIM. The Existing Ordinary Shares are not dealt on any other recognised investment exchange and no application has been made or is being madefor the Consolidated Ordinary Shares, the Consideration Shares or the Placing Shares to be admitted to any such exchange. It is expected that Admission willbecome effective and that trading in the Consolidated Ordinary Shares, the Consideration Shares and the Placing Shares on AIM will recommence following thecompletion of the Acquisition on 22 February 2010.AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or moreestablished companies. AIM securities are not admitted to the Official List of the United Kingdom Listing Authority (“UK Listing Authority”). Aprospective investor should be aware of the risks in investing in such companies and should make the decision to invest only after careful considerationand, if appropriate, consultation with an independent financial adviser. The attention of persons receiving a copy of this document is drawn to the RiskFactors set out in Part II of this document. The AIM Rules are less demanding than those of the Official List. Neither London Stock Exchange plc northe UK Listing Authority has itself examined or approved the contents of this document.The New Ordinary Shares will, on Admission, rank pari passu in all respects with the Existing Ordinary Shares and will rank in full for all dividends and otherdistributions thereafter declared, made or paid on the ordinary share capital of the Company. The New Ordinary Shares are not being made available to the publicin conjunction with Admission.WEST AFRICAN DIAMONDS PLC(Incorporated and registered in England & Wales with registered no. 5424214)Proposed Acquisition of Stellar Diamonds LimitedProposed Share ConsolidationProposed Placing of 25,000,000 Placing Shares at 20p per Placing ShareApplication for Admission of Enlarged Share Capital to trading on AIMProposed Change of Name to ‘Stellar Diamonds plc’Proposed increase in Authorised Share CapitalProposed adoption of New Articles of AssociationProposed amendments to Share Option SchemeNotice of General MeetingNominated Adviser and BrokerRBC Capital MarketsRoyal Bank of Canada Europe Limited, which trades as ‘RBC Capital Markets’, which is authorised and regulated in the UK by the Financial Services Authority andis a member of the London Stock Exchange, is the Company’s nominated adviser and broker for the purposes of the AIM Rules, and is acting exclusively for theCompany in connection with the Placing and the Admission. Royal Bank of Canada Europe Limited will not be responsible to anyone other than the Company forproviding the protections afforded to customers of Royal Bank of Canada Europe Limited or for advising any other person on the Placing or Admission and otherarrangements described in this document. Its responsibilities as the Company’s nominated adviser under the AIM Rules will be owed solely to London Stock Exchangeplc and will not be owed to the Company or to any Existing Director or Proposed Director or to any other person who may rely on any part of this document.Astaire Securities plc, which is authorised and regulated in the UK by the Financial Services Authority and is a member of the London Stock Exchange, is theCompany’s joint broker for the purposes of the Placing, and is acting exclusively for the Company in connection with the Placing and the Admission.Astaire Securities plc will not be responsible to anyone other than the Company for providing the protections afforded to customers of Astaire Securities plc or foradvising any other person on the Placing or Admission and other arrangements described in this document.Notice of a General Meeting of the Company to be held at 71 Queen Victoria Street, London EC4V 4DE, at Midday on 19 February 2010 is set out at the end of thisdocument. To be valid, the Form of Proxy accompanying this document for use at the General Meeting must be completed and returned, in accordance with theinstructions thereon, so as to be received by the Company’s Registrars, Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford IndustrialEstate, Dublin 18 not later than Midday on 17 February 2010.To the extent information has been sourced from a third party, this information has been accurately reproduced and, as far as the Existing Directors and ProposedDirectors are aware, no facts have been omitted which may render the reproduced information inaccurate or misleading.This document does not constitute an offer to sell or an invitation to subscribe for, or the solicitation of an offer to buy or subscribe for, shares in any jurisdictionwhere such an offer or solicitation is unlawful and, in particular, is not for distribution in or into the United States, Canada, Japan, Australia or South Africa orany other country outside of the United Kingdom where distribution may lead to a breach of any legal or regulatory requirements. Neither the Existing OrdinaryShares nor the New Ordinary Shares have been, nor will they be registered under the United States Securities Act of 1933 (as amended) or under the applicablesecurities laws of any state or other jurisdictions of the United States or of Canada, Japan, Australia or South Africa and, subject to certain exceptions, may notbe offered for sale or subscription, or sold or subscribed, directly or indirectly, within the United States, Canada, Japan, Australia, South Africa or the Republicof Ireland or to or by any national, resident or citizen of such countries. The distribution of this document in other jurisdictions may be restricted by law andtherefore persons into whose possession this document comes should inform themselves about and observe any such restriction. Any failure to comply with theserestrictions may constitute a violation of the securities laws of any such jurisdictions. No person is authorised, in connection with Admission, to give anyinformation or make any representation other than as contained in this document and, if given or made, such information or representation must not be reliedupon as having been authorised by the Company or Royal Bank of Canada Europe Limited or their respective directors.Copies of this document may be obtained free of charge for a period of one month from the date of this document from the registered office of the Company,20-22 Bedford Row, London WC1R 4JS or the offices of the Company’s nominated adviser and broker, Royal Bank of Canada Europe Limited, 71 Queen VictoriaStreet, London EC4V 4DE.This document contains forward-looking statements. These statements relate to the Enlarged Group’s future prospects, developments and business strategies.Forward-looking statementsForward-looking statements are identified by their use of terms and phrases such as “believe”, “could”, “envisage”, “estimate”, “intend”, “may”, “plan”, “will” orthe negative of those, variations or comparable expressions, including references to assumptions. The forward-looking statements in this document are based oncurrent expectations and are subject to risks and uncertainties that could cause actual results to differ materially from these expressed or implied by those statements.Certain risks to the Enlarged Group are specifically described in Part II of this document headed ‘Risk Factors’. If one or more of these risks oruncertainties materialises, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those expected,estimated or projected. Given these risks and uncertainties, potential investors should not place any reliance on forward-looking statements. Theseforward-looking statements speak only as at the date of this document. Neither the Existing Directors, the Proposed Directors nor the Companyundertake any obligation to update forward-looking statements or risk factors other than as required by the AIM Rules or by the rules of any othersecurities regulatory authority whether as a result of new information, future events or otherwise.This document is not a prospectus in the sense of Article 652a and/or Art 1156 of the Swiss Code of Obligations. Neither the Company nor the Ordinary Sharesare subject to the Swiss Federal Act on Investment Funds. Consequently investors do not have the specific protection of this legislation.

TABLE OF CONTENTSPageEXPECTED TIMETABLE 3KEY STATISTICS 3EXISTING DIRECTORS, PROPOSED DIRECTORS, SECRETARY AND ADVISERS 4DEFINITIONS 6GLOSSARY OF SELECTED GEOLOGICAL AND MINING TERMS 11KEY INFORMATION 14PART ILETTER FROM THE CHAIRMAN OFWEST AFRICAN DIAMONDS PLC 17PART II RISK FACTORS 38PART III INFORMATION ON THE BUSINESS OF THE STELLAR GROUP 44PART IV OVERVIEW OF DIAMONDS AND DIAMOND EXPLORATION 55PART V OVERVIEW OF COUNTRIES 59PART VI COMPETENT PERSON’S REPORT 64PART VIIINTERIM RESULTS OF THE WAD GROUP FOR THE 6 MONTHSTO 31 OCTOBER 2009 213PART VIII ACCOUNTANTS’ REPORT ON THE STELLAR GROUP 219PART IXUNAUDITED PRO FORMA STATEMENT OF CONSOLIDATEDNET ASSETS 248PART X ADDITIONAL INFORMATION 251PART XI NOTICE OF GENERAL MEETING 2902

EXPECTED TIMETABLEDespatch of this document 27 January 2010Latest time and date for receipt of Forms of Proxy for the Midday on 17 February 2010General MeetingRecord date for calculation of Consolidated Ordinary Shares close of business on 19 February 2010General Meeting Midday on 19 February 2010Completion of the Acquisition of Stellar 22 February 2010Admission and commencement of dealings in the Consolidated 8.00 a.m. on 22 February 2010Ordinary Shares and the New Ordinary Shares on AIMCREST accounts credited in respect of the Placing Shares 22 February 2010Adjustment to CREST accounts in respect of the Consolidated 22 February 2010Ordinary SharesDespatch of definitive share certificates in respect of the by 1 March 2010New Ordinary SharesDespatch of definitive replacement share certificates in by 1 March 2010respect of the Consolidated Ordinary SharesEach of the dates in the above timetable is subject to change at the absolute discretion of the Company and RBCKEY STATISTICSNumber of Existing Ordinary Shares in issue 89,947,519 (1)Proposed Share Consolidation ratio 5 for 1Number of Consolidated Ordinary Shares in issue assuming 18,333,268Share ConsolidationPost Share ConsolidationNumber of Consideration Shares being issued pursuant to 53,598,390 (2)the AcquisitionConsideration Shares as a percentage of the Enlarged Share Capital55 per cent.Placing Price per Placing Share20pNumber of Placing Shares being issued pursuant to the Placing 25,000,000Placing Shares as a percentage of the Enlarged Share Capital26 per cent.Number of Ordinary Shares in issue immediately following Admission 96,931,658Gross proceeds of the Placing £5,000,000Estimated net proceeds of the Placing receivable by the Company £4,300,000Market capitalisation of the Enlarged Group at the Placing £19,386,332Price following completion of the ProposalsISIN numberGB00B5V61531AIM symbol of the Enlarged GroupSTEL(1) This number will increase immediately before Completion by 1,718,821 of Existing Ordinary Shares which will be allotted tothe Existing Directors in satisfaction of outstanding remuneration due to them to the end of February 2010.(2) Assuming all Stellar Loan Note Holders convert their outstanding principal and interest into Stellar Shares at Completion whichare immediately acquired by WAD in consideration for Consideration Shares.3

EXISTING DIRECTORS, PROPOSED DIRECTORS, SECRETARY AND ADVISERSExisting DirectorsProposed Directors(immediately followingAdmission)Registered OfficeCompany SecretaryCompany Secretary(following Admission)John James Teeling (Non-Executive Chairman)James Andrew Hartley Campbell (Executive Deputy Chairman)Alex Abraham van Zyl (Executive Technical Director)James Michael Finn (Non-Executive Director)Paul Hendrick Nel (Non-Executive Director)all of:c/o West African Diamonds PLC20-22 Bedford RowLondonWC1R 4JSLord Peter Daresbury (proposed Non-Executive Chairman)Nicholas Karl Smithson (proposed Chief Executive Officer)Angus Alexander Forbes Ogilvie (proposed Finance Director)Luis Guilherme Cabrita da Silva (proposed Non-Executive Director)Steven James Poulton (proposed Non-Executive Director)Paul Rankine (proposed Non-Executive Director)James Andrew Hartley Campbell (proposed Non-Executive Director)all of:c/o West African Diamonds PLC20-22 Bedford RowLondonWC1R 4JS20-22 Bedford RowLondonWC1R 4JSJames Michael FinnAngus Alexander Forbes OgilvieNominated Adviser and Broker RBC Capital Markets71 Queen Victoria StreetLondonEC4V 4DEJoint Broker to the PlacingSolicitors to the Company(up to Admission)Solicitors to the Company(on and followingAdmission)Astaire Securities plc30 Old Broad StreetLondonEC2N IHTMcEvoy PartnersConnaught HouseBurlington RoadDublin 4Cobbetts LLPOne Colmore SquareBirminghamB4 6AJ4

Solicitors to the PlacingReporting AccountantsAuditorsCompetent PersonRegistrarsLawrence Graham LLP4 More London RiversideLondonSE1 2AUMazars LLPTower Bridge HouseSt. Katharine’s WayLondonE1W 1DDDeloitte & ToucheDeloitte & Touche HouseEarlsfort TerraceDublin 2IrelandMPH Consulting LimitedSuite 501133 Richmond Street WestTorontoOntarioCanada M5H 2L3Computershare Services (Ireland) LimitedHeron HouseCorrig RoadSandyford Industrial EstateDublin 185

DEFINITIONSIn this document, where the context permits, the expressions set out below shall bear the followingmeanings:-“2006 Act” the Companies Act 2006“Acquisition”“Acquisition Agreement”“Admission”“African Aura”“African Diamonds”“AIM”“AIM Mining, Oil & GasCompanies Note”“AIM Rules”“Altima”“Altus”“Astaire”“certificated” or “incertificated form”“City Code”the proposed acquisition by the Company of the entire issued and to beissued share capital of Stellarthe conditional agreement dated 27 January 2010 made between,amongst others, certain of the Vendors and the Company for the sale andpurchase of the entire issued and to be issued share capital of Stellar,more particularly described at paragraph 8 of Part I of this documentthe admission of the Enlarged Share Capital to trading on AIMfollowing completion of the Acquisition and the Placing and suchadmission becoming effective in accordance with the AIM RulesAfrican Aura Mining Inc., a TSX-V and AIM-quoted exploration anddevelopment corporation, existing under the laws of the Province ofBritish Columbia, focussed on gold, diamonds and iron ore inWest Africa and one of the Vendors, owning 58.72 per cent. of theissued share capital of Stellar, and previously named Mano RiverResources Inc.African Diamonds PLC, an AIM-quoted public company incorporatedand registered in England & Wales with registered no. 3999487AIM, an exchange regulated market operated by the London StockExchangethe ‘Note for Mining, Oil & Gas Companies’ published by the LondonStock Exchange setting out specific requirements, rule interpretationand guidance relating to resource companies, as may be amended fromtime to timethe AIM Rules for Companies (including the guidance notes thereto)published by London Stock Exchange governing, inter alia, admissionto AIM and the continuing obligations of AIM companies, as may beamended from time to timeAltima Global Special Opportunities Master Fund, a significant StellarShareholderAltus Resource Capital of Anson Place, Mill Court, La Charroterie, StPeter Port, Guernsey, GY1 1EJAstaire Securities plc, which is authorised and regulated by theFinancial Services Authority and joint broker to the Placingnot in uncertificated form (that is, not in CREST)the City Code on Takeovers and Mergers (as published by the Panel)“Combined Code” the Combined Code on Corporate Governance published in June 2008by the Financial Reporting Council“Company” or “WAD”West African Diamonds PLC, a company incorporated in England andWales under registered number 54242146

“Competent Person’sReport” or “CPR”“Completion”“Consideration Shares”“Consolidated OrdinaryShares”the competent person’s report relating to the mineral properties of boththe WAD Group and the Stellar Group prepared by MPH as set out inPart VI of this documentcompletion of the Acquisitionthe 53,598,390 (1) new Ordinary Shares to be issued to the Vendors asconsideration pursuant to the Acquisition Agreement on Completionordinary shares of £0.05 each in the capital of the Company followingthe Share Consolidation (previously Existing Ordinary Shares)“CREST”the relevant system (as defined in the CREST Regulations) in respectof which Euroclear is the Operator (as defined in the CRESTRegulations)“CREST Regulations” the Uncertificated Securities Regulations 2001 (SI 2001/3755)including any modifications of them or any regulations in substitutionfor them made under section 785 of the 2006 Act“Debsam”“Debsam Guinea”“Disclosure Rules”“Enlarged Group”“Enlarged Share Capital”“Euroclear”“Exchange Ratio”“Existing Articles” or“Existing Articles ofAssociation”“Existing Directors” or“Existing Board”“Existing Ordinary Shares”“EXPL”“Form of Proxy”“FSA”Debsam Ltd, a company incorporated under the laws of Liberia whoseregistered address is at 80 Broad Street, Monrovia, LiberiaSociété Debsam Guinea SARL, a company incorporated in Guineawith registration number R.A.E No. 95 A-914the Disclosure and Transparency Rules pursuant to the FSA Handbooksetting out the rules and guidance made by the FSA under FSMAthe Group including, from Completion, the Stellar Groupthe Ordinary Shares in issue immediately following the ShareConsolidation and Admission as enlarged by the issue of the NewOrdinary SharesEuroclear UK & Ireland Limited1.005 Consideration Shares per every 1 Stellar Sharethe current articles of association of the Company, proposed to bereplaced by the New Articles at the General Meetingthe existing directors of the Company, namely James Campbell,John Teeling, Alex van Zyl, James Finn and Paul Nelthe 89,947,519 (2) ordinary shares of £0.01 each in the Company in issueas at the date of this document, prior to the proposed Share Consolidationexclusive prospecting licencethe form of proxy accompanying this document, for use byShareholders in connection with the GMthe Financial Services Authority“FSMA” the Financial Services and Markets Act 2000“GNF”Guinean francs(1) Assuming all Stellar Loan Note Holders convert their outstanding principal and interest into Stellar Shares at Completion whichare immediately acquired by WAD in consideration for Consideration Shares.(2) This number will increase immediately before Completion by 1,718,821 of Existing Ordinary Shares which will be allotted tothe Existing Directors in satisfaction of outstanding remuneration due to them to the end of February 2010.7

“General Meeting” or “GM”“Group” or “WAD Group”“Heads of Terms”“Interim Accounts”“Lock-in Agreements”“London Stock Exchange”“Mazars”“MPH” or “CompetentPerson”“MRRI” or “Mano”“Mano Guinea”“New Articles” or “NewArticles of Association”“New Board”“New Ordinary Shares”“New Warrants”“Official List”“Options”“Option Holders”“Ordinary Shares”“Panel” or “Takeover Panel”the general meeting of the Company to be held at Midday on19 February 2010, at 71 Queen Victoria Street, London EC4V 4DEnotice of which is set out in Part XI of this documentthe Company and its subsidiary undertakings at the date of thisdocumentthe heads of terms dated 1 October 2009 between the Company(1) African Aura (2) and Stellar (3) relating to the sale and purchase ofthe entire issued and to be issued share capital of Stellarthe interim accounts of the Group for the six month financial periodended 31 October 2009those agreements between RBC, the Company and certain keyShareholders following Admission restricting the disposal of OrdinaryShares, further details of which are set out in paragraph 15.8 of Part Xof this documentLondon Stock Exchange plcMazars LLPMPH Consulting Limited, the competent person for the purpose of thepurpose of the AIM Mining, Oil & Gas Companies NoteMano River Resources Inc. whose subsidiary merged with AfricanAura Resources Ltd, and is now renamed as African Aura Mining Inc.Mano River Diamants Guinée SA, a company incorporated under thelaws of Guinea and registered under number 06496Athe new articles of association of the Company proposed to be adoptedat the General Meeting, a summary of the material changes to theExisting Articles being set out in the appendix to the Notice of GeneralMeeting in Part XI of this documentthe new board of directors of the Company following Admissioncomprising Lord Peter Daresbury, James Campbell, Karl Smithson,Angus Ogilvie, Luis da Silva, Steven Poulton and Paul Rankine78,598,390 new Ordinary Shares in aggregate to be issued pursuant tothe Acquisition and the Placing, being 53,598,390 (1) ConsiderationShares and the 25,000,000 Placing Sharesnew warrants to subscribe for Ordinary Shares at an exercise price of£0.2513 (or £1.005 in relation to Stellar Warrants currently exercisableat £1.00) to be granted by the Company on Completion to StellarWarrant Holders and Stellar Loan Note Holders, and if the StellarConvertible Debt is converted after Completion, to Altusthe Official List of the UKLAshare options granted or issued pursuant to the Share Option Schemeholders of share options granted under the Share Option Schemeordinary shares of £0.05 each in the capital of the Company, followingthe Share Consolidationthe Panel on Takeovers and Mergers(1) Assuming all Stellar Loan Note Holders convert their outstanding principal and interest into Stellar Shares at Completion whichare immediately acquired by WAD in consideration for Consideration Shares.8

“Petra”“Placing”“Placing Agreement”“Placing Price”“Placing Shares”“Proposals”“Proposed Directors”“Proposed ExecutiveDirectors”“Proposed Non-ExecutiveDirectors”“Prospectus Rules”“Pyramid”“Relationship Agreement”“RBC” or “RBC CapitalMarkets”“RBC Warrant”“Regulation S”“Resolutions”“Royalty Agreement”“Shareholders”Petra Diamonds Limited, a company incorporated in Bermuda with itsregistered office at 2 Church Street, Hamilton HM11, Bermudathe placing by RBC and Astaire on behalf of the Company of thePlacing Shares at the Placing Price pursuant to the Placing Agreement,details of which are set out in paragraph 15.6 of Part X of this documentthe conditional agreement dated 27 January 2010 entered into betweenRBC (1) the Company (2) the Existing Directors (3) the ProposedDirectors (4) Stellar (5) and Astaire (6) relating to the Placing, furtherdetails of which are set out in paragraph 15.6 of Part X of this document20p per Placing Sharethe 25,000,000 new Ordinary Shares to be issued pursuant to the Placingthe proposals set out in this document including those which requirethe approval of Shareholders at the GM, including the Acquisition, thePlacing, the adoption of the New Articles, amendments to the ShareOption Scheme, the Share Consolidation and the change of name ofthe Company to ‘Stellar Diamonds plcLord Peter Daresbury, Karl Smithson, Angus Ogilvie, Luis da Silva,Steven Poulton, Paul Rankine and James CampbellKarl Smithson and Angus OgilvieLord Peter Daresbury, Steven Poulton, Luis da Silva, Paul Rankine andJames Campbellthe prospectus rules made by the FSA under Part VI of the FSMAPyramid Resources Limited, a company incorporated in Sierra Leonewith its registered office at 1A Railway Line, Brookfields, Freetown,Sierra Leonethe relationship agreement between African Aura, the Company andStellar to be entered into at Completion, further details of which are setout in paragraph 15.9 of Part X of this documentRoyal Bank of Canada Europe Limited, trading as ‘RBC CapitalMarkets’, which is authorised and regulated by the Financial ServicesAuthority, the nominated adviser and broker to the Companythe warrant to subscribe for 1,250,000 new Ordinary Shares in theCompany at the Placing Price and to be exercisable for a period of twoyears following Admission, to be granted by the Company to RBC onAdmission, further details of which are set out in paragraph 15.7 ofPart X of this documentRegulation S under the US Securities Actthe special resolutions contained in the notice of General Meeting setout in Part XI of this documentan agreement dated 11 January 2005 entered into by Debsam Guinea,Mano and Mano Guinea pursuant to which Mano acquired certainrights to exploration data from Debsam Guineaholders of Existing Ordinary Shares, and following Admission, holdersof Consolidated Ordinary Shares and/or New Ordinary Shares9

“Share Consolidation”“Share Option Scheme”“Sobie and McGeorge”“Soviet Aid Mission”“Stellar”“Stellar Convertible Debt”“Stellar Convertible LoanNotes”“Stellar Group”“Stellar Loan Note Holders”“Stellar Option Holders”“Stellar Share”“Stellar Warrants”“Stellar Warrant Holders”“Sutherland”“Thunderball”“TSX-V”“UK” or “United Kingdom”“UK Listing Authority” or“UKLA”the proposed consolidation of the Company’s ordinary share capital ona 5 for 1 basis pursuant to the relevant Resolutionthe share option scheme of the Company, a summary of which is setout in paragraph 4 of Part X of this documentAfrican Aura’s and Stellar’s competent persons prior to the acquisitionof the Mandala alluvial diamond projectSoviet Union geological team that conducted exploration in Guinea inthe 1960’sStellar Diamonds Limited, a company incorporated and registered inGuernsey with registered no. 46859the £300,000 convertible debt together with any interest thereon owedby Stellar to Altus pursuant to a 16.5 per cent. convertible secured loannote due 21 September 2011convertible 20 per cent. annualised secured loan notes due 31 January2010 issued by Stellar to Stellar Loan Note Holders in the aggregatesum of US$575,000Stellar and its subsidiary undertakings at the date of this documentthe holders of Stellar Convertible Loan Notesthe holders of share options granted by Stellar representing the right tosubscribe for an aggregate of 3,992,500 Stellar Sharesan ordinary share of £0.01 in the share capital of Stellarwarrants to subscribe for Stellar Shares at £0.25 or £1.00 per Stellar Sharethe holders of Stellar WarrantsMr D G Sutherland – led a well respected Edinburgh based consultant,Placer Analysis Ltd., which has extensive alluvial diamond experiencein Guinea and other West African countriesThunderball Limited, a company incorporated under the laws of SierraLeone with its registered office at 13 Howe Street, Freetown, Sierra LeoneTSX Venture Exchange, a stock exchange in CanadaUnited Kingdom of Great Britain and Northern Irelandthe Financial Services Authority acting in its capacity as the competentauthority for the purposes of Part VI of the Financial Services andMarkets Act 2000“United States” or “US” the United States of America, its territories and possessions and anystate of the United States and the District of Columbia“US Dollar” or “US$” US dollar, the legal currency of the US“United States Securities Act” the US Securities Act of 1933, as amended“Vendors”African Aura and all other persons who hold Stellar Shares atCompletion (including the Stellar Loan Note Holders who will haveconverted their Stellar Convertible Loan Notes at Completion as moreparticularly described at paragraph 8 of Part I of this document)“£” pounds sterling, the legal currency of the UKIn this document, all references to times and dates are to those observed in London, United Kingdom.Throughout this document an exchange rate of £1:US$1.65 has been used.10

GLOSSARY OF SELECTED GEOLOGICAL AND MINING TERMS“alluvial”“Archaean”“basement”‘‘blow’’‘‘carat’’ or ‘‘ct’’“conflict diamonds”‘‘cpht’’“crater facies”“craton”‘‘diamondiferous’’“diatreme”“DMS”‘‘dyke’’‘‘feasibility study’’“grade”‘‘ha’’‘‘hypabyssal’’“kimberlite indicatorminerals’’ or “KIM’s”“indicated resource”refers to material formed or deposited by running waterthe period of geological time before 2,500 Mathe igneous, granitized or metamorphic crust of the Earth, belowwhich sedimentary deposits do not occura thickening (usually more than 10m thick) of a dykea standard unit of weight for diamonds, 1 carat equals 0.2 gramsdiamonds mined in a war zone and typically sold to finance aninsurgency, invading army’s war efforts or supporting a warlord’s activitycarats per hundred tonnesflat lying sedimentary and volcaniclastic rocks found in the uppermostparts of kimberlite craterspart of the Earth’s crust, usually formed from igneous andmetamorphic rocks, that has been stable for at least 1,000 Ma. Primarydiamondiferous deposits are generally restricted to Archaean cratons,i.e. those over 2,500 Ma oldcontaining diamondsa pipe-like volcanic vent or pipe created deep within the Earth’s crustby gaseous magma sourced from the mantle and containing fragmentsof rock and mineralsdense media separation, a technique used to produce a diamondbearing concentratea vertical or near-vertical sheet-like body of igneous rock which isdiscordant (i.e. cuts across the bedding or structural planes of thehost rock)a comprehensive study, including final engineering, undertaken todetermine the economic feasibility of a project; the conclusion willdetermine if a production decision can be made and is used forfinancing arrangements. Typically, the accuracy of these studies aimsto be in the +/- 10 to 15 per cent. rangethe relative mass of diamonds in a mass of rockhectarea magmatic intrusion which has crystallised at a relatively shallow deptha mineral, the presence of which may indicate the presence ofkimberlite and other minerals, including diamondsthat part of a diamond resource for which tonnage and volume,densities, shape, physical characteristics, grade and average diamondvalue can be estimated with a reasonable level of confidence. It isbased on exploration, sampling and testing information gatheredthrough appropriate techniques from locations such as outcrops,trenches, pits, workings and drillholes. The locations are too widely orinappropriately spaced to confirm geological and grade continuity but11

are spaced closely enough for continuity to be assumed and sufficientdiamonds have been recovered to allow a reasonable estimate ofaverage diamond value‘‘inferred resource’’‘‘in-situ’’‘‘kimberlite’’“km 2 ’’“macrodiamond”“mantle”“Ma”“mct/y”“measured resource”“microdiamond”“mm”‘‘pipe’’ or ‘‘diatreme’’‘‘pre-feasibility study’’that part of a diamond resource for which tonnage or volume, gradeand average diamond value can be estimated with a low level ofconfidence. It is inferred from geological evidence and assumed, butnot verified geological and grade continuity and a sufficiently largediamond parcel is not available to ensure a reasonable representationof the diamond assortment. It is based on information gathered throughappropriate techniques from locations such as outcrops, renches, pits,workings and drillholes that may be limited or of uncertain qualityand reliabilityrock occurring as was originally emplaced with all associated aftergeological events that have tectonically and structurally influenced therock as seen todayan uneven grained, ultramafic, intrusive igneous rock in which thevisible minerals may include olivine, phlogopite, pyrope garnet,picroilmenite and chrome-diopside cemented by a groundmass, whichmay include serpentine, calcite and chromite. Kimberlite may bediamondiferous and, along with olivine lamproites, are the only knownprimary source of diamondssquare kilometresdiamonds which would be recovered in a full scale mine plant;generally taken as being greater than 0.85 millimetres in the longestaxial dimensionthe inner part of the Earth from the crust to the coremillion yearsmillion carats per yearthat part of a Diamond Resource for which tonnage and volume,densities, shape, physical characteristics, grade and average diamondvalue can be estimated with a high level of confidence. It is based ondetailed and reliable exploration, sampling and testing informationgathered through appropriate techniques from locations such asoutcrops, trenches, pits, workings and drillholes. The locations arespaced closely enough to confirm geological and grade continuity andsufficient diamonds have been recovered to allow a confident estimateof average diamond valuediamonds usually considered of no commercial value and too small tobe recovered in a full scale mining operation; less than 0.5 millimetresin two axial dimensionsmillimetresthe carrot shaped volcanic vent that has been formed by explosiveaction and is characteristic of kimberlitepreliminary feasibility (pre-feasibility) studies are the intermediatestep in the project evaluation. At this stage there is sufficient drilling,bulk sampling and process test work for preliminary engineering.Typically, the accuracy of these studies is in the +/- 15-25 per cent.12

ange. The goal of these studies is to determine the mining and millingextraction methods and rates, the product recoveries, environmentaland permitting issues, preliminary capital and operating cost estimates“core drilling”“strike”‘‘tectonic’’“tph”“ultramafic”drilling with a hollow bit and core barrel to obtain a rock core samplethe horizontal direction or trend of a geological structurepertaining to the forces involved in, or the resulting structures of,movement in the Earth’s crusttonnes per hourterm given to an igneous rocks containing less than 45 per cent. silica13

KEY INFORMATIONThe following is a summary of certain information appearing elsewhere in this document and should beread as an introduction to this document only. This summary is qualified in its entirety by, and shouldbe read in conjunction with, the more detailed information and financial information appearingelsewhere in this document. Any decision to invest in Ordinary Shares should be based on considerationof this document as a whole. Prospective investors should consider the factors and risks attaching to aninvestment in the Ordinary Shares and in particular the risk factors set out in Part II of this document.IntroductionWADWAD was admitted to trading on London’s AIM market in January 2007, following a demerger fromAfrican Diamonds, and is a diamond company focussed on West Africa. WAD’s principal assets are theBomboko and Droujba projects in Guinea. It had two other projects in Sierra Leone, Pipe 3 andDump 11, which it has recently agreed to transfer subject to WAD retaining certain interests and rightsas more particularly detailed in paragraph 15.11 of Part X of this document.StellarStellar was incorporated in Guernsey on 2 May 2007 and is a focussed diamond exploration, productionand development company with a portfolio of properties in Guinea and Sierra Leone. Stellar’s Mandalaproject in south east Guinea began bulk sampling in April 2009. In Sierra Leone Stellar holds rights intwo other key properties: the Kono project in joint venture with Petra and the Tongo project.Reasons for the Acquisition and the PlacingThe Existing Board believes that Stellar’s assets are complementary to WAD’s and the executive andsenior management teams share a common goal. The Acquisition and the Placing will increase WAD’smarket capitalisation significantly on Admission to £19.4 million, with a wider spread of Shareholderswhich could increase liquidity in the trading of the Company’s shares.The Existing Board believes that the Enlarged Group will be able to diversify risk by owning a largerpool of assets, whilst taking advantage of synergies created by the merger of two corporate structuresand management teams – as well as benefitting from the potential efficiencies arising from the closegeographical proximity of the Bomboko and Mandala projects.The Placing will provide the Enlarged Group with sufficient working capital to enable it to implementits strategy and to pay the expenses of the Acquisition and the Proposals.Summary of the Acquisition termsThe consideration for the Acquisition is to be satisfied by the issue of 53,598,390 Consideration Sharesto the Vendors at a price of 19.375p per Consideration Share (3.875p pre Share Consolidation), beingthe mid-market price per Existing Ordinary Share prior to the suspension of the Company’s ExistingOrdinary Shares on 26 October 2009.Under the terms of the Acquisition Agreement, the Company has agreed to acquire the entire issued andto be issued share capital of Stellar for a consideration equating to approximately three times the valueof WAD, represented by an approximate 75:25 split of the share capital in the Enlarged Group prior tothe issue of Placing Shares – 75 per cent. being attributable to Consideration Shares and 25 per cent.being attributable to Existing Ordinary Shares.The Acquisition constitutes a ‘reverse takeover’ under the AIM Rules by virtue of the resulting change inboth board control and voting control and the size of the Acquisition relative to the Company and istherefore subject to the approval of Shareholders. Such approval is being sought at the General Meetingwhich has been convened for Midday on 19 February 2010, and notice of which is set out in Part XI ofthis document.14

Summary of the Placing termsThe Placing is intended to raise approximately £4.3 million for the Company (after expenses). ThePlacing Shares will represent 26 per cent. of the Enlarged Share Capital of the Company followingAdmission. The Placing Price represents a premium of approximately 3 per cent. to the mid-market preShare Consolidation share price at 26 October 2009 (the date of the suspension of the Existing OrdinaryShares on AIM).Strategy of the Enlarged GroupThe Existing Directors and the Proposed Directors believe that Completion of the Proposals will assistin building a leading diamond explorer and producer in West Africa and that a combination of Stellarand WAD will enable the Enlarged Group to benefit from a number of synergies arising from therelatively close geographic proximity of the Bomboko and Mandala projects, such as more efficientutilisation of staff and capital equipment and improvement of supply logistics.The key short term strategy of the Enlarged Group will be to focus on production and cash flow fromthese projects. However, the longer term strategy will involve the development of its advanced,high-grade kimberlite exploration projects at Tongo and Kono (in Sierra Leone) and Droujba and Bouro(in Guinea).With a strengthened balance sheet and two projects in production, the Existing Directors and theProposed Directors believe that the Enlarged Group should be in a strong position to seek further growthby acquisition in a sector where further consolidation is possible.Use of fundsThe Placing is intended to finance the Enlarged Group through the costs of the following projects andon-going business development:• Increasing production at the Mandala alluvial diamond project;• Increasing production at the Bomboko alluvial diamond project;• Large scale bulk sampling at the Tongo project;• Further exploration on the Droujba, Bouro and Ouria kimberlite projects;• Repayment of debt;• General working capital and ongoing care and maintenance costs for projects; and• Transaction cost of the Acquisition and Placing.A more detailed use of funds is set out in paragraph 15 of Part I of this document.Diamond supply and demandAccording to the Mining Journal, a substantial supply shortfall in diamonds is predicted after 2012,when the curves for production and demand for rough diamonds will start to diverge again followingthe closure and cessation of most commercial alluvial mines and exploration projects around the world,especially in Angola and Democratic Republic of the Congo.Risk FactorsThe Existing Directors and Proposed Directors consider the following risks and other factors to be mostsignificant for potential investors. Potential investors should carefully consider the risks before makinga decision to invest in the Ordinary Shares. More details on the risk factors are set out in Part II ofthis document.• Currency risks and exchange rate fluctuations• Economic risk• Political risk• Access to capital markets15

• Mining, exploration and development risks• Estimates of reserves, resources and production costs• Limited operating history• Competition• Environment, health and safety risks• Insurance risk• Licences and contractual commitments• Litigation risks• Reliance on African Aura• Management risks• Partner risk• Actions of third parties, including contractors and partners• Guinea government’s participation in diamond rights• Title matters• Liquidity of the Ordinary Shares and AIM generally• Taxation risk• Overseas securities lawsThe City CodeWAD has not previously fallen under the jurisdiction of the Panel as its central place of managementhas been outside of the UK.Following Completion and the appointment of the New Board, the Panel has confirmed that theEnlarged Group will in future fall under its jurisdiction and the City Code will apply for the benefitof all Shareholders.On Admission, assuming the Placing Shares are issued in full, African Aura will be interested inOrdinary Shares which in aggregate carry more than 30 per cent. of the voting rights in the Companyfollowing Completion. In this case the Takeover Panel has agreed to waive the mandatory bid obligationgiven the disclosure of African Aura’s potential shareholding in this document.Any further acquisition of Ordinary Shares by African Aura may lead to an obligation to make an offer forthe balance of the issued share capital of the Enlarged Group under Rule 9 of the City Code.Lock-in ArrangementsEach of the Existing and the Proposed Directors, African Aura and Altima has entered into Lock-inagreements on 27 January 2010 with the Company and RBC for a period of 12 months (or 3 months inthe case of Altima) from the date of Admission, except in limited circumstances, or with the priorwritten consent of RBC and the Company. The Lock-in agreements also contain orderly marketprovisions which apply for a further period of 12 months (or 3 months in the case of Altima) after expiryof the initial lock-in period.IrrevocablesAll of the Existing Directors together with African diamonds plc, Mantle Diamonds Limited and FastTrack Services Limited have irrevocably undertaken to vote (or to procure that the relevant votes arecast) in favour of the Resolutions to be proposed at the GM in respect of their holdings and those oftheir immediate families and connected persons totalling 22,420,115 Existing Ordinary Shares,representing approximately 24.93 per cent. of the current issued ordinary share capital of the Company.16

PART ILETTER FROM THE CHAIRMAN OF WEST AFRICAN DIAMONDS PLCWEST AFRICAN DIAMONDS PLC(Incorporated and registered in England & Wales with registered no. 5424214)John James Teeling (Non-Executive Chairman)James Andrew Hartley Campbell (Executive Deputy Chairman)Alex Abraham van Zyl (Executive Technical Director)James Michael Finn (Non-Executive Director)Paul Hendrick Nel (Non-Executive Director)To the holders of Existing Ordinary SharesDear ShareholderProposed Acquisition of Stellar Diamonds LimitedProposed Share ConsolidationProposed Placing of 25,000,000 Placing Shares at 20p per Placing ShareApplication for Admission of Enlarged Share Capital to trading on AIMProposed Change of Name to ‘Stellar Diamonds plc’Proposed increase in Authorised Share CapitalProposed adoption of New Articles of AssociationProposed amendments to Share Option SchemeNotice of General MeetingRegistered office:20-22 Bedford RowLondonWC1R 4JS27 January 20101. IntroductionFurther to the Company’s announcement on 26 October 2009 regarding the Heads of Terms having beensigned, the Existing Board is pleased to inform you that the Company has today announced that it hasconditionally agreed to acquire the entire issued and to be issued share capital of Stellar DiamondsLimited for approximately £10.4 million. Stellar is a privately-owned diamond exploration andproduction company focussed on Guinea and Sierra Leone.The consideration for the Acquisition is to be satisfied by the issue of 53,598,390 Consideration Sharesto the Vendors at a price of 19.375p per Consideration Share (3.875p pre Share Consolidation), beingthe mid-market price per Existing Ordinary Share prior to the suspension of the Company’s ExistingOrdinary Shares on 26 October 2009.In addition, Stellar Warrant Holders have agreed to cancel their Stellar Warrants conditional on the grantof New Warrants at Completion, Stellar Option Holders have agreed to surrender their optionsconditional on the grant of new Options at Completion and Altus has agreed to amend the terms of theStellar Convertible Debt so that any Stellar Shares arising on conversion will be acquired by theCompany in return for the allotment of Ordinary Shares at the Exchange Ratio. Further details of theAcquisition Agreement are set out in paragraph 8 of Part I of this document.The Acquisition constitutes a ‘reverse takeover’ under the AIM Rules by virtue of the resulting changein both board control and voting control and the size of the Acquisition relative to the Company and istherefore subject to the approval of Shareholders. Such approval is being sought at the General Meetingwhich has been convened for Midday on 19 February 2010, and notice of which is set out in Part XI ofthis document. A resolution will also be proposed at the General Meeting to consolidate the Company’sshare capital on a 5 for 1 basis.17

In order to provide the Enlarged Group with sufficient working capital to enable it to implement itsstrategy and to pay the expenses of the Acquisition and the Proposals, the Existing Board is alsoproposing to raise £5 million (approximately £4.3 million after expenses) by way of the Placing.The Placing has been arranged by RBC, which has today been appointed as the Company’s nominatedadviser and broker, and Astaire.If the Resolutions are duly passed at the General Meeting, and the other conditions set out in theAcquisition Agreement and Placing Agreement are met, trading in the Ordinary Shares and theNew Ordinary Shares to be issued pursuant to the Acquisition and the Placing on AIM will commencefollowing the completion of the Acquisition on 22 February 2010.The Existing Ordinary Shares were suspended from trading on AIM on 26 October 2009 and haveremained suspended pending the publication of this document and its despatch to Shareholders. TheExisting Ordinary Shares will therefore be restored to trading on AIM with effect from 8.00 a.m. today.Trading in such Existing Ordinary Shares will be cancelled immediately prior to admission of theConsolidated Ordinary Shares and New Ordinary Shares.On completion of the Acquisition, Lord Peter Daresbury, Karl Smithson, Angus Ogilvie, Luis da Silva,Steven Poulton and Paul Rankine will join the board of the Company and all the Existing Directors otherthan James Campbell will resign as directors of the Company.Resolutions to change the Company’s name to ‘Stellar Diamonds plc’, increase its authorised sharecapital, provide relevant share allotment authorities for the Proposals, amend the Share Option Schemeand adopt the New Articles will also be proposed at the General Meeting.The purpose of this document is to provide you with background to and information regarding theAcquisition, the Share Consolidation, the Enlarged Group and the Placing and to seek your approval ofthe Proposals at the General Meeting. Notice of the General Meeting is set out at the end ofthis document.2. Background to and reasons for the AcquisitionIn my Chairman’s statement which accompanied the 2009 Annual Report, I commented that theCompany was a producer of high quality gem stones, but was simply too small to be attractive toinstitutional investors given its market capitalisation on AIM at the time. I stated that the future strategyof the Company was to grow by merger and acquisition, whilst continuing to develop the Group’s ownresources. The transaction with Stellar is therefore a logical step in accordance with this strategy.The Existing Board believes that Stellar’s assets are complementary to WAD’s and the executive andsenior management teams share a common goal. The Acquisition and the Placing will increase WAD’smarket capitalisation significantly on Admission to £19.4 million, with a wider spread of Shareholderswhich could increase liquidity in the trading of the Company’s shares.The Existing Board believes that the Enlarged Group will be able to diversify risk by owning a largerpool of assets, whilst taking advantage of synergies created by the merger of two corporate structuresand management teams – as well as benefitting from the potential efficiencies arising from the closegeographical proximity of the Bomboko and Mandala projects.18

Enlarged Group’s assetsSource: WAD and Stellar3. Information on West African Diamonds PLCWAD was admitted to trading on AIM in January 2007, following a demerger from African Diamonds,and is a diamond company focussed on West Africa, concentrating on the Bomboko alluvial diamondexploration project and the Droujba kimberlite exploration project in Guinea. In Sierra Leone, WADhad two other projects, Pipe 3 and Dump 11, which it has recently agreed to transfer subject to WADretaining certain interests and rights as more particularly detailed in paragraph 15.11 of Part X. WADhas no net tangible assets in Sierra Leone.WAD’s interestsSource: WAD19

GuineaSummary table of WAD resourcesLower Screen Minimum Minimum Diamond Est. DiamondResource Class Project Size Tonnes Grade Resource Value(cpht) (cts) (US$/ct)Inferred Bomboko 2.5mm 1,000,000 4.06 41,000 121.59Inferred Droujba 0.5mm 200,000 80.08 160,000 UnknownSummary table of WAD properties in GuineaAsset Licence WAD Type of Expiry LicenceName No 1 Holder Interest Licence Date Area Km 2 CommentsBomboko A2005/015 African 100% Semi-industrial 10 Mar 2010 7.00 BulkA2005/1211 Diamonds 2 diamond Sampling inminingprogressBomboko A2009/199 Castlebay 100% but 3% Semi-industrial 7 Oct 2014 8.00 ExplorationA2009/2667 Resources Ltd royalty due diamond plannedto vendors of miningCastlebay 3Bomboko A2009/198 Castlebay 100% but 3% Alluvial 7 Oct 2011 8.00 ExplorationA2006/7107 Resources Ltd royalty due to diamond planned(now split vendors of explorationinto 2 blocks) Castlebay 3Bomboko A2009/197 MacGregor Option to Alluvial 7 Oct 2011 6.2 ExplorationA2005/4154 Crowe Ltd acquire 100% diamond plannedbut 3% royalty explorationdue to vendorsof the licence 4Droujba A2007/055 WAD 100% Diamond 1 March 2009 5 22.0 ExplorationA2007/820 exploration plannedNotes:(1) Licence numbers in italics denote the ministerial decree licence number.(2) African Diamonds is holding this licence on trust for WAD as more particularly described in paragraph 15.11 of Part X.(3) The royalties due to the vendors of Castlebay Resources Limited in respect of these licences are more particularly described inparagraph 15.11 of Part X.(4) The royalty payable by WAD to MacGregor Crowe Limited in respect of this licence upon exercise of the option is moreparticularly described in paragraph 15.11 of Part X.(5) WAD has applied for renewal of this licence pending Completion.Bomboko Alluvial Diamond Project – GuineaSource: WAD20

HistoryThe Soumbaya area, which is where the Bomboko project is situated, lies within the headwaters of theBomboko River immediately north of the watershed dividing the north-easterly flowing Nigertributaries and the southwesterly flowing rivers draining into the Atlantic Ocean. The area is hilly to thenorth, west and south but gradually opens to the east, or the downstream portion of the valley where theBomboko River joins the major River Baoulé near the town of Banankoro. Much has been written aboutthe northerly migrating Atlantic drainages capturing portions of the southernmost Niger tributaries andthe subsequent tapping of the diamondiferous kimberlites known to exist immediately south of the area.Previous work has been carried out by a number of companies in the Bomboko area over the years. Thefirst company to recover diamonds was Soguinex, a subsidiary of African Selection Trust. In the early1950’s a French company, Berger, worked in the Bomboko area and located a small deposit on theBassan, a north bank tributary, where it mined some 2,750 carats.The Soviet Aid Mission programme in the early 1960’s resulted in Soviet prospectors working in the areawhere they confirmed the presence of diamonds in the Bomboko River valley and its tributaries. A resourceof 9,900 carats at a grade of 0.16 cts/m 3 was demarcated adjacent to Soguinex diggings. An explorationprogramme followed in the 1980’s by Aredor which systematically sampled the entire flood plain.Between 1997 and 1998, AA Mining worked in the area directly downstream from Soumbaya to the areacovered by WAD’s Guinea Licences. Initially, pits were excavated on lines spaced at between 150 and350 metres. As well as the previous companies that have worked in this area, illicit artisanal miners havebeen active for years but not in the recent past whilst WAD has deployed mechanised earthmoving andplant operation.Ownership and LicencesWAD has rights in two exploration licences and two semi-industrial diamond mining licences (assummarised in the table on page 20) covering in aggregate some 29.2 km 2 in the Soumbaya districtalong the Bomboko River. The two semi-industrial mining licences allow WAD to bulk sample thedeposit underlying the licence area, one licence being valid until March 2010 and the other untilOctober 2014, each with further renewable periods of five years. The two exploration licences arevalid to October 2011 and grant the right to explore for alluvial diamonds within the boundaries ofthe licence.ResourcesIn relation to the licence held in trust for WAD by African Diamonds, there is an inferred resource of1 million tonnes of gravel at the current bulk sample grade of 4.06 cpht, which translates to 40,600ctsat a bottom cut off of 2.5mm. Elford and Acheson (2008) (the original WAD CPR authors fromBehr Dolbear), suggested that at Bomboko there is an exploration target of some 8 million tonnes at aglobal grade of between 8.125 and 9.75cpht (650,000 to 780,000cts) at a bottom cut off of 1mm. Thecurrent value of Bomboko production is estimated by MPH to be US$121.59/ct.BackgroundThe Bomboko project is still at early production stage and requires collation of historical and earlyphase sampling data followed by further systematic drilling and pitting to estimate the grade and extentof the deposit.Since acquiring the project in 2007, WAD has hand and mechanically dug sampling pits to substantiateprevious findings in the licence area and commenced bulk sampling.During the course of 2009 two plants were constructed, commissioned and put into operation at theBomboko project, featuring one 10-feet diameter pan plant and one 16-feet diameter pan plant.A global deposit grade of 4.06cpht is indicated from the bulk sampling and treatment to date. MPHconsiders however that the recently recorded grade is understating the potential of the deposit becauseof too much dilution from both overburden and bedrock, but improvements to mining and grade controlwould improve the quality and quantity of the diamond grade estimate. The quality and high averagestone size produced to date (0.549 cts/st) is encouraging with a gem to non-gem ratio of 53:47.21

Droujba Kimberlite Exploration Project – GuineaSource: WADHistoryWAD has applied for renewal of its previous alluvial diamond exploration licence in the areasurrounding the known diamond-bearing kimberlites and associated secondary diamond depositsaround Bounoudou in South East Guinea. Diamond mineralisation in the Bounoudou area wasestablished in the early 1950’s and diamonds from high grade, shallow alluvial deposits nearBounoudou village rapidly became the most prolific source of mined diamonds in Guinea. Invasion ofthe licence areas by artisanal diggers in the latter part of the 1950’s and eventual nationalisation of thediamond mining companies in Guinea in the early 1960’s meant that formal production rapidly declinedand has never fully recovered.The Soviet Aid Mission of the early 1960’s carried out extensive and detailed diamond exploration ofthe upper Diani valley and discovered a number of kimberlites, including a pipe-like body they termedDroujba (“Friendship”) in the Bounoudou kimberlite zone. Additional kimberlite dykes were found inthe neighbouring Gourbarako and Avili areas.Previous drilling and geophysics showed that the Droujba body has a possible subcrop area of around0.85 hectares below 5-10m of lateritic colluvial deposits. However some authors suggest a pipe of up tosix hectares in size. There is also considerable uncertainty concerning the geological model of the22

kimberlite pipe and this will be addressed during the course of 2010 through a planned drillingprogramme. The main Droujba kimberlite is also closely associated with a complex of dykes, the mostnotable of which is Dyke 3.Previous sampling, mainly by means of vertical drill holes, revealed the upper, near-surface kimberliteto be high grade as were a number of associated dykes. The main kimberlite body was for the most parthighly weathered but around one third of it, towards its base was ‘hard’. The Soviet Aid Missionrecovered diamonds down to 0.5mm from the prospecting samples and reported grades in volumetricunits (ct/m 3 ). Adjusting to 1mm smallest diamond size and using data for the measured bulk densitiesof weathered and hard kimberlite at Droujba, the Soviet prospecting results suggested grades of around90-100cpht for the weathered kimberlite and around 65cpht for the hard kimberlite. The lower graderecovered from the hard kimberlite is thought to be due to ineffecient plant processes.There are a range of different secondary alluvial deposits in the Bounoudou area, colluvial deposits andalluvial deposits along many of the tributaries and main streams, and the larger rivers such as the RiverSomolo. Although the more shallow and less water-logged of these deposits have been extensivelymined (initially by formal mining, latterly by artisanal digging), it is quite likely that there areexploitable sections remaining. Along the larger streams where the deeper gravels are water-logged,there is still the potential for significant deposits. Within the WAD licence area in Droujba the largestsuch deposit is along the River Somolo, where an order-of-magnitude of its exploration potential hasbeen put at 300,000-500,000 carats. It is also likely that certain sections of the small tributaries havenever been mined and that certain of the extensive colluvial deposits have never been fully blocked outor mined.Mining of the Droujba kimberlite pipe started in 1963. Production figures are not reliable, but theyappear to imply that a significant portion of the original kimberlite resource should remain. For a rangeof reasons, the mined grade (around 60 cpht) in the 1960’s was significantly below the prospectinggrade for the weathered kimberlite.A suite of the most up to date ground geophysical surveys were conducted over the Droujba kimberlitepipe and satellite Katcha dykes during late 2007 on behalf of WAD by a specialist geophysicalcontractor from South Africa. The key outcome of the survey confirms that the surface shape and sizeof the pipe appears to be larger than initially thought. From the results of the survey, the probable sizeof the kimberlite seems at least twice as large as the previously postulated size of 0.85ha (based on thearea of the current water filled open pit). Parts of this potential extension could have eluded detectionin the past because of the complex geology in combination with historical exploration technologies. Inaddition, two new signatures characteristic of kimberlitic vents or satellite pipes were discovered.Further, two new elongated magnetic bi-polar shapes with signatures similar to kimberlitic dykes orsmall kimberlite blows were also highlighted.Ownership and LicencesWAD has previously held a 22 km 2 alluvial diamond exploration licence for both primary source andalluvial diamonds in the Bounoudou area over the Droujba kimberlite pipe, associated kimberlite dykesand alluvial deposits. This exploration licence, however, lies wholly within the licence granted toStellar’s subsidiary company, Friendship Diamonds Guinée.In 2007 WAD applied for a licence to explore for “diamonds and associated minerals” over the Droujbaarea and Stellar simultaneously applied for a licence to explore for “primary diamonds” over the samearea, and the Ministry of Mines in Conakry granted them both licences. Following appeals to theMinistry to adjudicate on/over the conflicting rights granted to the two parties, Stellar and WAD madea proposition to the Ministry that upon Completion of the Proposals the licences would be combined,but if the merger proposals were unsuccessful then a 50:50 joint venture would be established over bothlicences. The Ministry approved this approach.In addition both WAD and Stellar have recently submitted their respective applications for renewal oftheir licences and the Ministry has agreed to approve WAD’s application in the name of the EnlargedGroup upon Completion. The New Board will seek to ensure that such renewal covers all of the rightsapplied for by both WAD and Stellar and is confident of its grant, not least because such rights must berenewed under Guinean law.23

ResourcesSutherland (2007) (who prepared an independent report on the Droujba licence), estimated anexploration target of some 120,000 cts within the Droujba kimberlite pipe itself and has recommendedthe exploration of several colluvial and alluvial targets within the permit area as well as exploration ofthe kimberlite dykes.BackgroundWAD has completed a geophysical survey of the licence area and very shallow core drilling in anattempt to define the limits of the kimberlite targets (see further comments regarding work that has beenundertaken on the asset to date in the preceding section).During 2009 core drilling was conducted on the geophysical anomalies adjacent to the Droujbakimberlite pipe and a mobile DMS plant was moved to site to prepare for bulk sampling the mainkimberlite body. However, the small drill rig utilised was unsuitable for the purpose as it could notpenetrate to any significant depth.The Existing Directors and Proposed Directors believe that within the WAD licence area in Droujba,there is a likelihood of discovering additional kimberlites within the known Bounoudou kimberlite zoneas well as in certain locations to the south of the Bounoudou kimberlite zone. It is considered mostprobable that any new discoveries will be dykes, but the discovery of small pipes cannot be excluded.Sierra LeoneSummary table for WAD project rights in Sierra LeoneAsset Licence WAD Type ofName No Holder Interest Licence CommentsDump 11 ML 1/2004 African Diamonds 5% net Mining Lease Operated by Pyramid from Oct 2009but transfer smelterto Pyramid in royaltyprogressEPL 11/2002 African Diamonds 5% net Gold & Diamond This licence is being held by Africansmelter Prospecting Diamonds in trust for WAD and WAD isroyalty Licence holding in trust for Pyramid awaitingreduction to three smaller areas and to bechanged to an exploration licenceand then transferred to PyramidPipe 3 EXPL 8/2002 formerly African 20% free Exploration Operated by Thunderball fromDiamonds but has carry to Licence August 2009now been productiontransferred toThunderballNote: Since the admission of WAD to AIM in January 2007, African Diamonds has held its interest in the licences referred to in thetable above in trust for WAD, as more particularly described in paragraph 15.11 of Part X.WAD’s interests in Sierra LeoneSource: WAD24

Pipe 3HistoryPipe 3 lies within EXPL 8/2002 and is the smallest of the three known kimberlite pipes in the area.Pipes 1 and 2 lie within the adjacent Koidu Holdings (previously Branch Energy) mining lease. Thethree pipes are located to the east of Koidu along an apparent north easterly lineament with Pipe 3 beingthe most easterly. The pipe is closely associated with the Dyke Zone 0. At present Pipe 3 is flooded toprevent the influx of illicit diamond miners and the bulk sample plant has been mothballed.Twenty thousand tonnes of kimberlite were sampled in 2005 from Pipe 3 yielding a grade of 5.5cphtand a diamond value of USD198/ct. It was evident that the pan plant treating the kimberlite had anumber of inefficiencies and therefore audit work was completed during the course of 2007 using aDMS plant and appropriate control procedures. This audit work yielded a grade of 7.8cpht from553 tonnes of pan plant tailings and 19.3cpht from 387 tonnes of previously stockpiled kimberlite fromthe pipe. The diamonds were also revalued by Overseas Diamonds N.V. at $228/ct.A ground geophysical survey over Pipe 3 has resulted in the discovery of what is believed to be asecond, though smaller, kimberlite pipe.Project rightsIn August 2009 WAD entered into a joint venture agreement with Thunderball in respect of the Pipe 3kimberlite pipe and adjacent dykes in Koidu, Sierra Leone. Ownership of licence was transferred toThunderball, and WAD retains a right to a 20 per cent. free carry to production from the licence. It isan exploration licence located in the Koidu District of eastern Sierra Leone measuring 67.64 km 2 whichis adjacent to Stellar’s Kono licences.BackgroundExploration to date has consisted of mapping, geophysics and bulk sampling. WAD’s bulk sampling ofthe Pipe 3 kimberlite however returned disappointing results (low grades and few high-value diamonds)which subsequently devalued the project. Sampling yielded 5,670 diamonds at a grade between 9.2 and19.33cpht with diamond values estimated to be in the order of US$200/ct. (Elford and Acheson,(2008)). The results suggest that the project is unlikely to be commercially viable if looked at inisolation, but combined with other projects, the Pipe could be economic.Dump 11HistoryThe dump is an accumulation of the undersize (-1.5mm) material from Plant 11. Much of the dumpmaterial is from the mining lease, which comprised the high-grade material deriving from the RiversMeya, Woyie and Moinde. Although plant production records are not available, senior WAD staff andtheir consultant, Mr Alieu Mahdi, stated that the plant treated 120 tonnes per hour, worked 24 hours perday, seven days a week for 52 weeks a year for 23 years. Discussions with Mr Alhassan Coker, the seniorplant operative from 1983 – 1986 and then production manager from 1986 to 1992 when the plantclosed, confirmed these parameters. Considering that 30 to 35 per cent. of the head-feed would reportto slimes then approximately 7m tonnes of material could be present in the dump. A portion of theslimes would be clay in suspension and this will have been lost with the initial drainage of water intothe River Moinde.For security reasons, the plant was closed after maintenance and consequently any problems with holesin screens would not be noticed until the end of the shift with a corresponding loss of +1.5mm sizematerial. As the screens were of the slot variety quite large diamonds could therefore have been lost(macles, etc). Kimberlite samples from Pipes 1 and 2 (now Koidu Holdings) were also treated at thisplant (about 15,000 tonnes each). Initially, a screen size of 1.6mm was used but this was then changedto 1.2mm when it was noticed that illicit diamond miners were removing the material at night to treatelsewhere. It has also been reported that during the last years of the plant stores became a problem andspare screens were not always available, so there is likelihood that in the last years of production more+1.5mm material was discarded. Blockage and choking of the classifier also took place according to thestaff, which resulted in head-feed gravel reporting directly to slimes.25

Project rightsWAD has a 5 per cent. net smelter royalty interest in a mining lease located in the Koidu District ofeastern Sierra Leone measuring 2.17 km 2 . Ownership of the lease is in the process of being transferredto Pyramid which will operate future exploration and development of the project and will be whollyresponsible for any expenditure.BackgroundA 150tph gold and diamond recovery plant was commissioned during 2008. 45,275 tonnes of Dump 11material was treated through the plant. The gold and diamond results were disappointing and did not meetprevious expectations, with the gold grade being 0.05g/ton and diamond grade 1.8cpht. The diamondswere valued at $52.24/ct. There were significant production and technical difficulties, particularly with thegold extraction plant.EPL11/2002HistoryEPL 11/ 2002 lies to the south and south west of EPL 10/2002 and EXPL 8/2002 as far south as theNimini Hills. A reconnaissance stream-sampling programme was carried out during 2003 and 2004 withinthe concession with 50 samples collected in 2003 and 47 in 2004. Samples were collected in the Tankoro,Gbane and Nimikoro Chiefdoms west of the Moinde Fault. Sampling was also undertaken due east of theMoinde Fault.Ownership/PermitsThis licence is being held in trust for Pyramid pending the licence attaining exploration status pursuant toan agreement entered into by WAD with Pyramid on 17th December 2009 as more particularly describedin paragraph 15.11 of Part XII.BackgroundFollow-up samples taken during the course of both gold and diamond exploration are currently awaitinganalyses by the new owners.4. Information on StellarStellar is a privately held diamond mining exploration, development and production company,incorporated in Guernsey, with assets in Guinea and Sierra Leone.Stellar’s Mandala project is in south east Guinea 60km from the Company’s Bomboko exploration projectand has a resource base of 676,000 carats. It began bulk sampling in April 2009 and is now targeted toproduce approximately 10,000 carats per month. In Sierra Leone Stellar also holds two key propertieswhich are advanced exploration kimberlite projects: the Kono project (49 per cent. ownership) in jointventure with Petra (51 per cent.) and the Tongo project (100 per cent. ownership). Both these projects arehost to high-grade kimberlite dyke systems that demonstrate economic potential.Petra has informed Stellar that it will not contribute 51 per cent. of 2009 project expenditure and willtherefore dilute its interest in the Kono project. Stellar would therefore become the majority owner ofthe Kono project. The exact equity holdings will be calculated once final 2009 expenditure has beencompiled by Stellar. Stellar and Petra are currently in negotiations regarding the potential acquisitionby Stellar of Petra’s remaining project equity.Further information on the Stellar Group can be found in Part III of this document.5. Strategy of the Enlarged GroupThe Existing Directors and the Proposed Directors believe that completion of the Proposals will assistin building a leading diamond explorer and producer in West Africa and that a combination of Stellarand WAD will enable the Enlarged Group to benefit from a number of synergies arising from therelatively close geographic proximity of the Bomboko and Mandala projects, such as more efficientutilisation of staff and capital equipment and improvement of supply logistics.26

The key short term strategy of the Enlarged Group will be to focus on production and cash flow fromthese projects. However, the longer term strategy will involve the development of its advanced,high-grade kimberlite exploration projects at Tongo and Kono (in Sierra Leone) and Droujba and Bouro(in Guinea). Each of these projects demonstrates economic potential and work programmes are plannedin order to define this potential.Enlarged Group’s assets and interestsSource: WAD and StellarWith a strengthened balance sheet and two projects in production, the Existing Directors and theProposed Directors believe that the Enlarged Group should be in a strong position to seek further growthby acquisition in a sector where further consolidation is possible.6. Interim results of the WAD Group for the 6 months ended 31 October 2009The interim results for the Company for the six months ended 31 October 2009 were announced on7 January 2010. The announcement is reproduced in Part VII of this document.7. Current Trading and Future ProspectsSince the date of the Interim Accounts, production has continued at the Bomboko project at the rate ofapproximately 9,200 tonnes per month, yielding a grade of approximately 3.5 cpht. This is below budgetas a result of an increased boulder load, which requires manual removal from the feed bin grizzley, aswell as the reliance on a single articulated dump truck. The Existing Directors and Proposed Directorsbelieve that the Bomboko project is capable of achieving a production rate of up to 5,000 carats permonth in the short to medium term and subject to completion of the Proposals, it is proposed that asecond 16-foot diameter pan plant be installed at the Bomboko project and additional earth movingmachinery acquired to enable expected production of between 50,000 and 70,000 tonnes per month tobe achieved.Sales of a diamond parcel totalling 670 carats was undertaken in South Africa in November 2009 andachieved an average price per carat of US$121.58 (including a single stone of 4.19cts that was sold forUS$14,000, or an average of US$3,341 per carat). This compares favourably to the average price ofUS$116 per carat achieved for a sale in June 2009 which comprised of 438 carats of diamond recoveredfrom the initial bulk sampling. This earlier sale included a 16-carat stone that sold for US$16,000 (orUS$1,000 per carat). The large average stone size (>0.5ct per stone) and high gem to industrial ratio(53:47) of the Bomboko diamonds drives the sales values achieved and the Existing Directors andProposed Directors believe that as the diamond market improves this will be reflected in higherdiamond prices for this particular product.27

8. Principal terms of the AcquisitionUnder the terms of the Acquisition Agreement, the Company has agreed to acquire the entire issued andto be issued share capital of Stellar for a consideration equating to approximately three times the valueof WAD, represented by an approximate 75:25 split of the share capital in the Enlarged Group prior tothe issue of Placing Shares – 75 per cent. being attributable to Consideration Shares and 25 per cent.being attributable to Existing Ordinary Shares.Prior to the Placing but assuming the Share Consolidation has taken place, a total of 53,598,390 (1)Consideration Shares will be issued and allotted to the Vendors using the Exchange Ratio.Based on the number of Existing Ordinary Shares in issue as at the date of this document (being89,947,519 (2) ) and the mid-market price of 3.875p per Existing Ordinary Share on 26 October 2009 (thedate that trading on AIM in such shares was suspended), the total consideration for the Acquisition istherefore approximately £10.4 million of Consideration Shares.Completion of the Acquisition Agreement is conditional upon the passing of the Resolutions, theapproval by Stellar Shareholders of certain amendments to Stellar’s articles of association to obligeminority shareholders to transfer their shares to the Company if required, the Placing Agreementbecoming unconditional (except as to Admission) and the London Stock Exchange agreeing toAdmission (subject to allotment of the New Ordinary Shares).At Completion, each of the Stellar Loan Note Holders, having extended the maturity of their StellarConvertible Loan Notes to Completion, will convert the principal and interest outstanding in relation tothe Stellar Convertible Loan Notes into ordinary shares in the capital of Stellar at the price of £0.20 perStellar Share which will then be immediately acquired by the Company on the same terms as all otherordinary shares in Stellar (save that one Stellar Loan Note Holder (Lipari Holdings Limited) has theright to be repaid instead of convert). Any related loan note security will also be released. The StellarLoan Note Holders, who are also entitled upon conversion to be granted Stellar Warrants, will cancelsuch warrants conditional on the Company granting them a number of New Warrants (calculated bymultiplying the number of Stellar Warrants by the Exchange Ratio) to acquire Ordinary Shares onsimilar terms, save that the exercise price for a Stellar Warrant will be multiplied by the Exchange Ratio.The Acquisition Agreement includes standard commercial warranties for a transaction of this type,given by African Aura and the director shareholders of Stellar to the Company relating to the StellarGroup, and also given by the Company to the Vendors relating to the WAD Group. The liability of theStellar warrantors is limited to 25 per cent. of the value of the Consideration Shares.Also at Completion, but under the terms of separate documentation:-• Altus, Stellar and the Company will enter into an agreement pursuant to which Altus agrees thatthe terms of the Stellar Convertible Debt shall be amended so that if Altus chooses to exercise itsconversion rights thereunder, any Stellar Shares thereby arising will be immediately acquired bythe Company for the same consideration provided to the Vendors (being the allotment and issueof Ordinary Shares at the Exchange Ratio). Altus is also entitled to receive one further warrantover a Stellar Share, exercisable at £0.25 per Stellar Share, for each Stellar Share arising onconversion and Altus has agreed to cancel such warrants, conditional on the Company granting ita number of New Warrants (calculated by multiplying the number of existing warrants by theExchange Ratio) to acquire Ordinary Shares on similar terms, save that the current exercise pricewill be divided by the Exchange Ratio. Security granted by Stellar to Altus over certain mine fleetand flow-sort recovery process plant will be released on conversion;• All Stellar Warrant Holders will cancel their Stellar Warrants conditional on the Companygranting them a number of New Warrants (calculated by multiplying the number of existingStellar Warrants by the Exchange Ratio) to acquire Ordinary Shares on similar terms, save thatthe exercise price for a Stellar Warrant will be divided by the Exchange Ratio; and(1) Assuming all Stellar Loan Note Holders convert their outstanding principal and interest into Stellar Shares at Completion whichare immediately acquired by WAD in consideration for Consideration Shares.(2) This number will increase immediately before Completion by 1,718,821 of Existing Ordinary Shares which will be allotted tothe Existing Directors in satisfaction of outstanding remuneration due to them to the end of February 2010.28

• Stellar Option Holders will surrender their share options over Stellar Shares conditional on theCompany granting them a number of new options to acquire Ordinary Shares under the ShareOption Scheme (calculated by multiplying the number of existing options by the Exchange Ratio),and having an exercise price equal to the Placing Price, or higher for some historic option grants.The terms of the Share Option Scheme are set out in paragraphs 4 of Part X of this document andcertain proposed amendments to it in paragraph 4.6 of X of this document.9. New Board of the Enlarged GroupThe Existing Board currently consists of James Campbell, John Teeling, Alex van Zyl, James Finn andPaul Nel. On completion of the Acquisition and Admission, Lord Peter Daresbury, Karl Smithson,Angus Ogilvie, Luis da Silva, Steven Poulton and Paul Rankine will join the board, with all of theExisting Directors other than James Campbell resigning from the Existing Board.The New Board of the Enlarged Group on Completion and Admission will therefore consist ofthe following:The Lord Daresbury, Non-Executive Chairman (aged 56)Peter Daresbury has held numerous executive positions, including CEO from 1997 to 2000 of theGreenalls Group, which had an annual turnover of £983 million and a FTSE market capitalisation of£1.7 billion. In 2000, the company was re-named The De Vere Group plc, and Peter Daresbury becameNon-Executive Chairman until he stood down in 2006. Peter Daresbury has also served asNon-Executive Chairman of Kazakhgold Group Ltd from 2005-2007 and Executive Chairman ofHighland Gold from 2002 to 2004. Peter is currently Chairman of AIM quoted Nasstar plc, Chairmanof the Aintree Racecourse Company Ltd and Chairman of Mallett plc. Current directorships includeSumatra Copper and Gold Ltd., and in addition, since 2005, Peter sits on the Fleming Family andPartners Private Equity Committee.Karl Smithson, Chief Executive Officer (aged 43)Karl Smithson was appointed as Stellar’s Chief Executive Officer with effect from 1 January 2007,having been Chief Operating Officer for diamonds for African Aura for three years. He is a geologygraduate of Kingston University and in 2006 completed his MBA at the Graduate School of Businessin Cape Town, South Africa and was awarded with the Old Mutual Gold Medal.Karl has 21 years of diamond experience gained with a number of companies in senior managementpositions, including De Beers (10 years), SouthernEra Diamonds (2 years) and African Aura/Stellar(9 years), and Karl also ran his own diamond exploration consultancy for three years. Karl’s workingcareer has been focussed on diamond exploration in Africa and he has been responsible for a number ofnew diamond discoveries in Botswana, Zimbabwe, Sierra Leone and Liberia.Angus Ogilvie, Financial Director (aged 50)Angus Ogilvie is an Associate of the Chartered Institute of Management Accountants (London, UK)and has a Bachelor of Accounting Science degree (BCompt) from the University of South Africa. Angusworked in Durban, South Africa for seven years with Deloitte, Dunlop and Wilkinson Sword to theFinancial Controller level. From 1987 to 1997 Angus worked in Botswana for De Beers’ Orapa &Letlhakane mines and Potash as a mine accountant. Angus emigrated to the UK in 1997 and has workedas a stockbroker for Edward Jones and in senior Financial Manager roles for companies includingElsevier, Beko and Siemens.Paul Rankine, Non-Executive Director (aged 48)Paul Rankine has 22 years of mining and investment experience. After graduating as a Mining Engineerfrom the University of the Witwatersrand in 1985, he worked for four years for Gold Fields of SouthAfrica on various South African underground gold, copper and South African and German coal mines.Paul spent a further five years in senior mine management working for De Beers in Botswana. Oncompletion of an MBA from the University of Cape Town in 1994, Mr Rankine moved into miningrelated fund management with four years at JP Morgan Investment Management in New York andLondon. He also spent four years with Citigroup Asset Management as Director of global mining equity29

esearch, before becoming a metals and mining industry consultant. In his capacity as Chief ExecutiveOfficer, he was recently responsible for the incorporation, quotation and management of ZambeziNickel Ltd, an African mining and exploration company, on AIM. He joined Altima Partners LLP inJune 2007 to work on mining investment opportunities. Paul is a member of the South African instituteof Mining and Metallurgy and the Society of Mining Engineers Inc.Steven Poulton, Non-Executive Director (aged 34)Steven Poulton holds an honours degree in Geology from the University of Southampton (1997) and amasters degree in Mining Geology from the Camborne School of Mines (1998). In addition to Stellar,he was a director of African Aura (before it merged with MRRI), a company he founded in 2004, as wellas its subsidiary Ridgeway Energy Ltd. He is the Chief Executive Officer and a co-founder (2007) ofAltus Strategies Ltd, a private natural resource investment firm. He is a director of ALTUS AssetManagement Ltd, the investment manager of ALTUS Resource Capital Ltd. Steven has a track recordin the exploration sector at identifying opportunities, negotiating agreements, raising venture financeand building talented management teams. He is a fellow of the Geological Society of London, a fellowof the Institute of Materials, Minerals and Mining.Luis da Silva, Non-Executive Director (aged 39)Luis, took over the role of President & Chief Executive of MRRI (now African Aura) in October 2007having joined in February of the same year as Chief Financial Officer. He gained his extensiveinternational experience with the multinationals Lafarge S.A. and Blue Circle Industries Plc as well asStevin Rock, formerly of the Dragomar Group. His career has taken him across the world in anoperational, technical and corporate capacity. Most recently as a Director of Group Audit, Luis washeading Lafarge's Asia Pacific internal audit department based in Malaysia having previously beenposted to Paris, France, with the same company.Luis is a graduate Mining Engineer from Camborne School of Mines and read for his MBA at theCranfield School of Management.James Campbell, Non-Executive Director (aged 45)James Campbell joined the Company from De Beers, where he was a general manager in the globalmining and exploration group. He was responsible for resource delivery on all advanced explorationprojects in Botswana (including the AK6 Kimberlite), execution of mine-based resource extensionprogrammes, the De Beers diamond laboratories and related capital expansion programmes.His distinguished 21-year career at De Beers started in the field as an exploration geologist, under theleadership of Alex van Zyl, currently the Technical Director of the Company. Alex and James went onto evaluate many of the De Beers Group’s resources, both green and brown fields. James worked on andled small-scale mine development before being appointed as personal assistant to Nicky Oppenheimerwhen the latter assumed his chairmanship of De Beers in 1998. Shortly thereafter James was part of theleadership team which undertook a fundamental strategic review of the business. James then went on todirect a global e-business programme for De Beers and headed the IT department at corporateheadquarters before returning to the global mining and exploration group.James holds a degree in Mining & Exploration Geology from the Royal School of Mines and an MBAwith distinction from Durham University. He is a Fellow of the Institute of Mining, Metallurgy &Materials, Chartered Engineer (UK), Chartered Scientist (UK) a Professional Natural Scientist (RSA)and a member of the Institute of Directors. James joined the Existing Board as Deputy Chairman on 1December 2006 and is also currently the Managing Director of African Diamonds plc and a Director ofSwala Resources plc.10. Share Option SchemeWAD currently operates an unapproved Share Option Scheme for Existing Directors, employees andconsultants which was approved by a resolution of the WAD board on 15 September 2006. Currently theCompany has granted 7,100,000 options over Existing Ordinary Shares, all of which are outstanding withexercise prices ranging from 3p to 24.25p per Existing Ordinary Share.The Share Option Schemeprovides that no option granted pursuant to the scheme shall be exercisable after the participant ceases to30

hold employment, subject to the Company’s discretion to allow a vested Option to remain exercisable.Pursuant to a resolution of the WAD board on 10 January 2010 it was agreed to permit the Optionsgranted to persons who had ceased employment/consultancy previously to remain exercisable for aperiod of one year from the date of that meeting and all other remaining Options would continue toremain exercisable for a period of seven years from the date of grant of the relevant Option.Stellar has also granted share options over 3,992,500 Stellar Shares to the Proposed Directors andemployees, all of which are outstanding with exercise prices ranging from 22.5p to 87.1p per StellarShare. Pursuant to the Acquisition, all Stellar Option Holders have agreed to surrender their shareoptions over Stellar Shares conditional on the grant of new options over Ordinary Shares. Further detailsof these arrangements are set out in paragraph 8 of Part I of this document.The new options over Ordinary Shares to be granted to Stellar Option Holders will be granted under theShare Option Scheme, to which certain amendments are being proposed, subject to Shareholderapproval at the General Meeting. Further details of the proposed amendments are set out inparagraph 4.6 of Part X of this document.On Admission, 5,432,463 Options will be outstanding, representing approximately 5.6 per cent. of theEnlarged Share Capital.11. Share Consolidation and Increase in Authorised Share CapitalThe Company is proposing to undertake a restructuring of its share capital. In order to consolidate thenumber of Existing Ordinary Shares in issue and to allow the Proposals to proceed at an appropriatepricing, it is proposed to carry out the Share Consolidation.Under the Share Consolidation, it is proposed that the issued and unissued Existing Ordinary Shareswill be consolidated so that every 5 such Existing Ordinary Shares of 1p each will be consolidated intoone Consolidated Ordinary Share of 5p. Shareholders with a holding of Existing Ordinary Shares whichis not exactly divisible by 5 will have their holdings rounded down to the nearest whole number ofConsolidated Ordinary Shares. Holders of fewer than 5 Existing Ordinary Shares will not be entitled toreceive any Consolidated Ordinary Shares following the Share Consolidation. Any fractions arisingfrom the Share Consolidation will be aggregated and sold for the benefit of the Company.All outstanding Options granted under the Share Option Scheme will be consolidated in the same wayas the Existing Ordinary Shares. All Consideration Shares and all Placing Shares will be allotted on apost-Share Consolidation basis, as will be options granted to Stellar Option Holders and New Warrantsgranted to Stellar Warrant Holders and Stellar Loan Note Holders in connection with the Acquisition.Authority for the Share Consolidation will be sought by the proposal of the relevant Resolution at theGeneral Meeting. Following the Share Consolidation, replacement share certificates will be despatched toShareholders in respect of newly denominated Consolidated Ordinary Shares held in certificated form.Share certificates are expected to be despatched by 1 March 2010. Existing certificates will be void. Inrespect of Existing Ordinary Shares held in uncertificated form, CREST accounts will be credited with thenewly denominated Consolidated Ordinary Shares on the record date for the Share Consolidation, being19 February 2010.The issue and allotment of the New Ordinary Shares will increase the issued share capital of theCompany by 329 per cent. In order to accommodate the New Ordinary Shares and to give the Companyflexibility to effect future allotments of Ordinary Shares (in accordance with the appropriate shareholderauthorities) it is proposed that the authorised share capital of the Company be increased from£2,000,000 to £10,000,000 by the creation of 160,000,000 additional Ordinary Shares. Authority for theincrease in the authorised share capital of the Company will be sought by the proposal of the relevantResolution at the General Meeting. This proposal will however become redundant should the NewArticles be adopted at the General Meeting as these will no longer require the Company to retain anauthorised share capital in line with changes to company law under the 2006 Act. In this case theresolution approving the increase in authorised share capital will fall away.31

12. Corporate GovernanceThe New Board acknowledges the importance of the principles set out in the Combined Code issued bythe Financial Reporting Council. Although the Combined Code is not compulsory for AIM companies,the New Board intends to apply the principles as far as practicable and appropriate for a relatively smallpublic company as follows:New BoardThe New Board will be formed on Admission and will meet regularly and be responsible for strategy,performance, approval of major capital projects and the framework of internal controls. To enable theNew Board to discharge its duties, all directors will receive appropriate and timely information.Briefing papers will be distributed to all directors in advance of board meetings, and all directors willhave access to the advice and services of the Company Secretary, who is responsible for ensuring thatboard procedures are followed and that applicable rules and regulations are complied with. The NewArticles of Association provide that directors will be subject to re-election at the first opportunity aftertheir appointment and the board will voluntarily submit to re-election at intervals of three years.Audit CommitteeThe audit committee will be constituted on Admission. The audit committee will comprise JamesCampbell, Lord Peter Daresbury (proposed Chairman) and Steven Poulton. The audit committee will beresponsible for ensuring the appropriate financial reporting procedures are properly maintained andreported on, and for meeting with the Enlarged Group’s auditors and reviewing their reports andaccounts and the Enlarged Group’s internal controls.Remuneration CommitteeThe remuneration committee will be constituted on Admission. The remuneration committee willcomprise Paul Rankine (proposed Chairman), Lord Peter Daresbury and Steven Poulton. Theremuneration committee will be responsible for reviewing the performance of the executive directors,setting their remuneration levels, determining the payment of bonuses, determining at what point theEnlarged Group should adopt any form of share option plan and considering the grant of options underany such plan and, in particular, the price per share and the application of the performance standardswhich may apply to any grant.Nomination CommitteeThe nomination committee will be constituted on Admission. The nomination committee will comprisePaul Rankine (proposed Chairman), Lord Peter Daresbury and Steven Poulton. The nominationcommittee will be responsible for board appointments and making recommendations to the board.AIM Rules Compliance CommitteeIn line with the AIM Rules for Companies, the New Board will constitute an AIM Rules Compliancecommittee on Admission which will adopt an AIM Rules for Companies compliance policy setting out theprocedures to be followed in order that the Enlarged Group will fully comply with the AIM Rules forCompanies. The Committee will comprise Angus Ogilvie (proposed Chairman), Steven Poulton andLord Peter Daresbury.There is in place a share dealing code applicable to the directors and their connected persons.Internal Financial ControlThe New Board will be responsible for establishing and maintaining the Enlarged Group’s system ofinternal financial control and will place importance on maintaining a strong control environment. Thekey procedures which the directors will establish with a view to providing effective internal financialcontrol are as follows:• the Enlarged Group’s organisational structure has clear lines of responsibility;• the Enlarged Group prepares a comprehensive annual budget that is approved by the New Board.Quarterly results are reported against the budget and variances are closely monitored bythe directors;32

• the New Board is responsible for identifying the major business risks faced by the EnlargedGroup and for determining the appropriate courses of action to manage those risks; and• oversight of and involvement in regular subsidiary company board meetings, complete withstructured operational reporting requirements.The New Board recognises, however, that such a system of internal financial control can only providereasonable, not absolute, assurance against material misstatement or loss. The New Board has reviewedthe effectiveness of the system of internal financial control as will be operated by the Enlarged Group.13. Dividend PolicyIn the short term, the New Board does not intend to declare a dividend but will reconsider this as andwhen the growth and profitability of the Company allows. The declaration and payment of any futuredividends by the Company and the quantum thereof will be dependent upon the Enlarged Group’sresults, financial position, cash requirements, future prospects, profits available for distribution andother factors deemed by the New Board to be relevant at the time.14. PlacingThe Company, the Existing Directors, the Proposed Directors, Stellar, RBC and Astaire have todayentered into the Placing Agreement pursuant to which each of RBC and Astaire, as agents for theCompany, have agreed, subject to the fulfilment of certain conditions, to use their respective reasonableendeavours to procure subscribers for the Placing Shares at the Placing Price.The Placing is intended to raise approximately £4.3 million for the Company (after expenses). ThePlacing Shares will represent 26 per cent. of the Enlarged Share Capital of the Company followingAdmission. The Placing Price represents a premium of approximately 3 per cent. to the mid-market preShare Consolidation share price on 26 October 2009 (the date of the suspension of the ExistingOrdinary Shares of the Company on AIM).The obligations of RBC and Astaire under the Placing Agreement are conditional upon, inter alia,completion of the Acquisition Agreement and Admission taking place by 8.00 am on 22 February 2010 (orsuch later date, being not later than 10.00 a.m. on 31 March 2010, as the Company and RBC shall agree).The Placing Shares will, on Admission, rank pari passu in all respects with the Consolidated OrdinaryShares and will have the right to receive all dividends and other distributions thereafter declared, madeor paid in respect of the issued ordinary share capital of the Company.Further details of the Placing Agreement are set out in paragraph 15.6 of Part X of this document.15. Reasons for Placing and use of ProceedsThe proceeds of the Placing, net of total anticipated expenses, will be approximately £4.3 million whichwill be applied principally as follows:-• £300,000 for further capital expenditure at the Mandala alluvial diamond project in respect ofadditional earthmoving machinery to enable production levels to be increased;• £800,000 for further capital expenditure on infrastructure and upgrading of the plant recoverysection at the Bomboko alluvial diamond project to enable production levels to be increased;• £1,000,000 towards the Droujba kimberlite exploration project for further drilling andpre-feasibility bulk sampling;• £200,000 towards exploration covering the Bouro kimberlite project and Ouria alluvial resourcewhere further bulk sampling will be undertaken;• £1,000,000 towards repayment of debt owed to African Aura, Petra and Lipari Holdings Limited;and• £1,000,000 for general working capital purposes and ongoing care and maintenance costsfor projects33

Underground development of the high-grade Tongo and Bouro Kimberlite dykes will be primarilyfunded from Enlarged Group revenues over the next 24 months.16. Lock-In ArrangementsAt Admission, the Existing Directors and the Proposed Directors, and persons connected with them willown 4,687,361 Ordinary Shares representing 4.8 per cent. of the Enlarged Share Capital, assuming theAcquisition is approved by Shareholders.Under the terms of the Lock-In Agreements, the Existing Directors, the Proposed Directors and AfricanAura have undertaken to the Company and RBC not to dispose of any interest in any Ordinary Sharesheld by them immediately following completion of the Acquisition, other than in certain limitedcircumstances, for a period of 12 months following Admission, and Altima, a significant shareholder,has agreed the same but with a three month lock-in period.In addition, the Existing Directors, the Proposed Directors, African Aura and Altima have agreed that,for a further period of 12 months, or 3 months in the case of Altima, they and persons connected to themwill only dispose of Ordinary Shares which they hold immediately following Admission through RBCand in such orderly manner as RBC, acting reasonably, shall determine.17. Relationship AgreementAt Admission, African Aura, the Company and Stellar will enter into a Relationship Agreementwhereby African Aura, which will own some 31.8 per cent. of the Enlarged Share Capital followingAdmission, agrees that all transactions and relationships between African Aura (and any of itsassociates) and the Company will be conducted on terms which allow the Enlarged Group to carry onits business independently, at arm’s length and on a normal commercial basis. Further, in order tominimise the possibility of any conflicts between African Aura and the Company, they agree to granteach other a first right of refusal at no charge in relation to gold and iron ore projects (for African Aura)and diamond projects (for the Company) of which they become aware, save for their own discoverieswhich will be referred on commercial arm’s length basis. African Aura further agrees to provide certainfinancial, legal, clerical and administrative support and office space to the Company each month. Theagreement provides that these arrangements will continue for so long as African Aura and its associateshold more than 25 per cent. of the voting rights in the Company. The agreement also terminates a similarexisting arrangement between African Aura and Stellar.18. TaxationGeneral information relating to UK and Irish taxation with regards to the Admission and the Placing issummarised in paragraph 11 of Part X of this document. A Shareholder who is in any doubt as to hisor her tax position, or is subject to tax in a jurisdiction other than the UK or the Republic ofIreland, should consult his or her professional advisers immediately.19. Admission to AIM and DealingsThe Acquisition constitutes a ‘reverse takeover’ under the AIM Rules and is therefore dependent uponthe approval of Shareholders being given at the General Meeting, details of which are set out below.Resolutions will be proposed at the General Meeting, inter alia, to approve the Acquisition. If theResolutions are duly passed at the General Meeting, the admission of the Company’s Existing OrdinaryShares to trading on AIM will be cancelled (immediately prior to Admission) and the Enlarged ShareCapital will be admitted to trading on AIM.Application will be made by the Company for the Consolidated Ordinary Shares and the New OrdinaryShares to be admitted to trading on AIM and it is anticipated, subject to completion of the Proposals,that Admission to AIM will become effective and that trading in the Enlarged Share Capital on AIMwill commence on 22 February 2010.34

If the Acquisition is not completed, the Existing Ordinary Shares will continue to be traded on AIM, theNew Ordinary Shares will not be issued or admitted to AIM, the Proposed Directors will not beappointed to the New Board, and the Existing Directors will remain on the Existing Board.20. The City CodeWAD has not previously fallen under the jurisdiction of the Panel as its central place of managementhas been outside of the UK.Following Completion and the appointment of the New Board, the Panel has confirmed that theEnlarged Group will in future fall under its jurisdiction and the Code will apply for the benefit ofall Shareholders.On Admission, assuming the Placing Shares are issued in full, African Aura will be interested inOrdinary Shares which in aggregate carry more than 30 per cent. of the voting rights in the Companyfollowing Completion. In this case the Takeover Panel has agreed to waive the mandatory bid obligationsince the potential level of shareholding of African Aura is being disclosed in this document and this isthe basis upon which investors will be subscribing.Rule 9 states that any person or group of persons acting in concert that is interested in shares which inaggregate carry not less than 30 per cent. of the voting rights of a company but does not hold sharescarrying more than 50 per cent. of such voting rights must normally make a general offer for the balanceof the issued share capital should there be any increase in the percentage of the shares carrying votingrights in which they or any person acting in concert with them are interested.An offer under Rule 9 must be made in cash and at the highest price paid by the person required to makethe offer or any person acting in concert with him for any interest in shares of the company during the12 months prior to the announcement of the offer.African Aura (previously named Mano River Resources Inc.) is a TSX-V and AIM-quoted explorationand development corporation, existing under the laws of the Province of British Columbia, focussed ongold, diamonds and iron ore in West Africa and one of the Vendors, owning 58.72 per cent. of the issuedshare capital of Stellar, African Aura had net assets of US$41.5 million (as at 31 December 2008) andas at the date of this document has a market capitalisation of approximately US$61.5 million.21. General MeetingSet out at Part XI of this document in a notice convening the General Meeting of the Company to beheld at 71 Queen Victoria Street, London EC4V 4DE at Midday on 19 February 2010.At this General Meeting, the following resolutions will be proposed as special resolutions:1. Conditional on the Placing Agreement becoming unconditional and not having been terminated:(a)(b)(c)(d)to approve the Share Consolidation;to approve an increase in the Company’s authorised share capital. This resolution will notcome into effect if Resolution 2 is passed as the New Articles will not require an authorisedshare capital any longer;to approve the Acquisition;to give the directors the requisite share capital authorities for the purpose of allotting OrdinaryShares in connection with the Acquisition and the Placing, and also generally to authorisethem to allot up to one third of the Enlarged Share Capital until the Company’s 2010 annualgeneral meeting;(e) to approve certain amendments to the Share Option Scheme as described in paragraph 4.6of Part X of this document;35

(f)(g)to give the directors the power to disapply statutory pre-emption rights to allot OrdinaryShares in connection with the Acquisition on the Placing and also generally to disapplysuch rights on an ongoing basis until the Company’s 2010 annual general meeting inrespect of up to ten per cent. of the Enlarged Share Capital; andto change the name of the Company to ‘Stellar Diamonds plc’; and2. To adopt the New ArticlesTo be passed, the special resolutions will require a majority of not less than 75 per cent. voting in personor on a poll by proxy in favour of the relevant Resolution.The implementation of the Proposals also provides the Company with the opportunity to adopt the NewArticles of Association. These will take into account changes in English company law brought about bythe 2006 Act. A description of the material provisions of the Existing Articles is set out in paragraph 13of Part X of this document, and an explanation of material differences of the New Articles ofAssociation to the Existing Articles of Association of the Company is set out in the appendix to theNotice of General Meeting. A copy of the New Articles will be available at the General Meeting and isalso available for inspection at the Company’s registered office and on the Company’s website.Whether or not you intend to be present at the General Meeting, as a Shareholder you are requested tocomplete and return the Form of Proxy in the reply-paid envelope which is enclosed with this document,in accordance with the instructions printed thereon, as soon as possible and in any event so as to bereceived by the Company’s registrars, Computershare Services (Ireland) Limited, Heron House, CorrigRoad, Sandyford Industrial Estate, Dublin 18 not later than Midday on 17 February 2010. Completionand return of the Forms of Proxy will not prevent you, as a Shareholder, from attending the GeneralMeeting and voting in person should you wish to do so.22. Irrevocable UndertakingsAll of the Existing Directors together with African Diamonds plc, Mantle Diamonds Limited and FastTrack Services Limited have irrevocably undertaken to vote (or to procure that the relevant votes arecast) in favour of the Resolutions to be proposed at the GM in respect of their holdings and those oftheir immediate families and connected persons totalling 22,420,115 Existing Ordinary Shares,representing approximately 24.93 per cent. of the current issued ordinary share capital of the Company.23. Further InformationYour attention is drawn to Parts 3,7,8 and 9 which provide additional information on the WAD Groupand on the Stellar Group.24. Action to be takenEnclosed with this document you will find a Form of Proxy for use by Shareholders in connection withthe General Meeting. Whether or not you intend to be present at the GM, Shareholders are asked tocomplete, sign and return the Form of Proxy to the Company’s Registrars as soon as possible but in anyevent so as to arrive no later than Midday on 17 February 2010. The completion and return of a Formof Proxy will not preclude Shareholders from attending at the GM and voting in person should they wishto do so. Accordingly, whether or not Shareholders intend to attend the GM, they are urged to completeand return the Form of Proxy as soon as possible.36

25. RecommendationThe Existing Directors consider that the Acquisition and the Placing are in the best interests ofthe Company and Shareholders as a whole.Accordingly, the Existing Directors unanimously recommend that Shareholders vote in favour ofthe Resolutions to be proposed at the General Meeting, as they have undertaken to do in respectof their own beneficial shareholdings amounting to, in aggregate, 4,813,256 Existing Sharesrepresenting 5.35 per cent. of the existing issued share capital of the Company as at the date ofthis document.Yours faithfully,John TeelingChairman37

PART IIRISK FACTORSAn investment in the Ordinary Shares may not be suitable for all recipients of this document. Investorsare therefore strongly recommended to consult an investment adviser under the FSMA, who specialisesin advising on investments of this nature before making their decision to invest.The Existing Directors and Proposed Directors consider the following risks and other factors to be mostsignificant for potential investors, but the risks listed do not necessarily comprise all those associatedwith an investment in the Ordinary Shares and the risks listed below are not set out in any particularorder of priority. Potential investors should carefully consider the risks described below before makinga decision to invest in the Ordinary Shares. If any of the following risks actually occurs, the EnlargedGroup’s business, financial condition, results or future operations could be materially adverselyaffected. In such a case, the price of the Ordinary Shares could decline and investors may lose all or partof their investment.1. Financial RisksCurrency Risks and Exchange Rate FluctuationsThe Enlarged Group will conduct its operations in jurisdictions other than that of its reporting currencyand will therefore be subject to fluctuations in exchange rates between these countries in relation to therelative costs of inputs and labour and returns received from production. A significant fluctuation in anyof the Enlarged Group’s key operating currencies and notably the US$, could have a material adverseeffect on the business, financial condition and results of operations of the Enlarged Group.The Enlarged Group’s future income will be subject to exchange rate fluctuations and may becomesubject to exchange control or similar restrictions. Fluctuations in exchange rates between currencies inwhich the Enlarged Group operates may cause fluctuations in its financial results, which are notnecessarily related to the Enlarged Group’s underlying operations.While hedging of exchange rates is possible, there is no guarantee that appropriate hedging will beavailable at an acceptable cost. The Company has no current hedging rate strategy in place.Economic RiskIn common with other early stage emerging market economies, many African countries (where all ofthe Enlarged Group’s assets are located) are dependent on sale proceeds from primary commodityproduction which are subject to fluctuations in world commodity prices. In general, these economieshave also experienced devaluations, high inflation and high interest rates. All these economic risks mayfrom time to time adversely affect the Enlarged Group’s operations. Historically, commodity prices(including diamonds) have displayed wide ranges and are affected by the numerous factors over whichthe Company does not have any control. These include world production levels, international economictrends, expectations for inflation, speculative activity, consumption patterns and global or regionalpolitical events.Political riskAfrican territories experience varying degrees of political instability. There can be no assurance thatpolitical stability will continue in those countries where the Group currently has or in the future willhave operations. In the event of political instability or changes in government policies in thosecountries where the Group operates, the operations and financial condition of the Group could beadversely affected.The government in Guinea is led by a military junta which has not been elected and local oppositionparties are demanding it be replaced with a democratically elected government. In the event thiscontinues, general strikes and other civil unrest could occur which could affect a number of the EnlargedGroup’s operations. Whilst the new leader has stated that he is committed to fighting corruption, there38

is no guarantee that this will result in any reduction in the high levels of crime. An attempt made on thelife of the leader in recent weeks has led to his leaving the country for medical treatment. With his returnunlikely soon the uncertainty looks set to continue.A civil war was fought in Sierra Leone over a period of 10 years, ending in 2002. Whilst the countryhas undergone two peaceful elections and it now has a democratically elected president, there is still ahigh risk of civil unrest and violent political demonstrations.Whilst the Enlarged Group’s security and loss control procedures have been enhanced, the risk remainsof illegal mining, theft, threats to workers’ lives and safety as well as industrial espionage, informationloss and the loss of operational efficiency.Access to Capital MarketsThe Enlarged Group may require additional financial resources to continue funding its exploration anddevelopment activities. The Enlarged Group may in the future raise additional funds through public orprivate financing or through bringing in joint venture partners. The availability of this capital is subjectto general economic conditions and lender and investor interest in the Enlarged Group’s projects. Toensure the availability of capital, the Enlarged Group will maintain an investor relations programme inorder to inform all Shareholders and potential investors of the Enlarged Group’s developments. Anyinvestment in the Enlarged Group should be regarded as an investment in the potential diamondresources rather than a direct investment in the commodity itself.2. Operational RisksMining, Exploration and Development RisksThe successful exploration and development of mineral properties is speculative and subject to anumber of uncertainties which even a combination of careful evaluation, experience and knowledgemay not eliminate. There is no certainty that the expenditures made or to be made by the EnlargedGroup in the exploration and development of its mineral properties or properties in which it has aninterest will result in the discovery of mineralised materials in commercial quantities. Most explorationprojects do not result in the discovery of commercially mineable deposits. While discovery of diamondbearing structures may result in substantial rewards, few properties that are explored are ultimatelydeveloped into producing mines. Major expenses may be required to establish reserves by drilling andto construct mining and processing facilities at a site. It is impossible to ensure that explorationprogrammes carried out by the Enlarged Group will result in profitable commercial mining operations.Estimates of Reserves, Resources and Production CostsAlthough potential resource figures incorporated in this document have been carefully prepared by thecompetent person, these amounts are estimates only. There can be no assurance that any particular level ofrecovery of diamonds from such potential reserves or resources will in fact be realised or that an identifiedresource will ever qualify as commercially mineable (or viable) and/or which can be legally andeconomically exploited. In addition, any future exploration rights acquired (including under any prospectingright held or which may be acquired in the future by the Enlarged Group) may not result in the economicor feasible production of diamonds. Estimates of potential reserves, resources and production costs can alsobe affected by such factors as environmental permitting regulations and requirements, weather,environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations andwork interruptions. Material changes in reserves, grades or recovery rates may affect the economic viabilityof projects and current projects could become commercially unviable as a result of any material reductionin estimates of reserves and resources. Reserves are reported as general indicators of mine life and shouldnot be interpreted as assurances of mine life or the profitability of current or future operations.The ultimate volume of production of diamonds may be lower than expected or even non-existent. TheEnlarged Group’s operations are subject to the normal risks inherent in diamond exploration andproduction. The Enlarged Group’s viability will require it to continue to replace and/or expand itsreserves and any failure to do so will affect the commercial viability of its projects.The business of exploration mining and mineral processing by its nature involves significant risksand hazards.39

Droujba ProjectAlthough each of WAD and Stellar respectively have made an application for a renewal of its expiredlicence in relation to the Droujba project and the Existing Directors and Proposed Directors believe thatthe renewals will be granted, there can be no guarantee that this will be the case. Further details of thecurrent situation on the licence renewals are set out on page 23 of this document. If the licences are notrenewed the Enlarged Group will lose the benefit of the rights under them which would have a materialadverse affect on the business, financial condition and results of operations of the Enlarged Group.Limited Operating HistoryAs a result of its limited revenue generation to date and its short history, the Enlarged Group is subjectto all the risks associated with the operations of a developing business. The Enlarged Group’s prospectsmay be jeopardised by the type of difficulties that often affect businesses in the early stages of theirdevelopment. There can be no guarantee the Enlarged Group will move into overall profitability orremain profitable.CompetitionThere is aggressive competition within the mining industry for the discovery and acquisition ofproperties considered to have commercial potential. The Enlarged Group competes with otherexploration and mining companies, many of which have greater financial resources than the EnlargedGroup, for the acquisition of mineral claims, leases and other mineral interests as well as for therecruitment and retention of qualified employees and other personnel.Environment, Health and Safety RisksMining projects may be subject to the environmental laws of states in which the Enlarged Groupoperates. These laws may result in limitations of mining activities, which may become increasinglystrict in the future. Environmental awareness on the part of the public has been increasing, as has publicpressure on environmental authorities. No assurance can be given that the need to comply with currentor future environmental laws, regulations or commitments will not have a material adverse effect on theactivities of the Enlarged Group or that the liabilities resulting from any environmental damage causedby the activities of the Enlarged Group will not be material. There can be no assurance that all permitswhich the Enlarged Group may require can be obtained or maintained on reasonable terms. There maybe existing or future unforeseen liabilities arising from the Enlarged Group’s activities or the activitiesof any previous activities of third parties in the relevant licensed areas.Insurance RisksThe Enlarged Group may decide to insure its activities in accordance with industry practice and maydecide to insure the risks it considers appropriate for its needs and for its circumstances. Insurance coverwill not be available for every risk faced by the Enlarged Group.Although the New Board believes the Enlarged Group carries adequate insurance with respect to itsactivities in accordance with industry practice, in certain circumstances its insurance may not cover orbe adequate to cover the consequences of such events. In addition, the Enlarged Group may be subjectto liability for pollution, cave-ins, pit wall failures, flooding or other hazards against which it may electnot to insure because of high premium costs or other reasons. The occurrence of an event that is notcovered or fully covered by insurance could have a material adverse effect on the business, financialcondition and results of operations of the Enlarged Group.Licences and contractual commitmentsThe interests of the Enlarged Group are in some circumstances subject to licence and contractualrequirements, which include, inter alia, certain financial commitments which, if not fulfilled, couldresult in the suspension or ultimate forfeiture of the relevant licence or of the Company’s interests inprospects. Government action, which could include non-renewal of licences, may result in any incomereceivable by the Enlarged Group being adversely affected.40

Litigation risksWhile the Enlarged Group has no material outstanding litigation, there can be no guarantee that currentor future actions of the Enlarged Group will not result in litigation. Due to the inherent uncertainty ofthe litigation process, there can be no assurance that the resolution of any particular legal proceedingswill not have a material effect on the Enlarged Group’s financial position or results of operations.Reliance on African AuraThe Company, Stellar and African Aura will enter into the Relationship Agreement at Completion. TheEnlarged Group will therefore be dependent on African Aura for some staff and infrastructurerequirements. The agreement terminates when African Aura ceases to own more than 25 per cent. of thevoting capital of the Company and the provision of services from African Aura is renewable annually.If the agreement is terminated or the provision of services from African Aura cannot be agreed, thiscould adversely affect the operations of the Enlarged Group.Management risksThere can be no assurance that the Enlarged Group will be able to manage effectively the expansion ofits operations or that the Enlarged Group’s current personnel, systems, procedures and controls will beadequate to support the Enlarged Group’s operations. Any failure of management to manage effectivelythe Enlarged Group’s growth and development could have a material adverse effect on the EnlargedGroup’s business, financial condition and results of operations.The Enlarged Group is highly dependent on the Proposed Executive Directors and will rely onthe senior staff that it retains. Whilst the board will continue to ensure that the ProposedExecutive Directors, consultants and any key employees are appropriately incentivised, their servicescannot be guaranteed, and the loss of their services to the Enlarged Group may have a material adverseeffect on the performance of the Enlarged Group.The diverse geographic locations of the Enlarged Group’s operations may present specific supervisorydifficulties to the New Board and as such could create ongoing difficulties in relation to themanagement and operation of the Enlarged Group. This could, in the longer term, have a materialadverse effect on the Enlarged Group’s performance.Partner RiskThe Enlarged Group is reliant on its partners and therefore this could adversely effect theEnlarged Group’s operations. Partner risks include but are not limited to:-• reliance on partners to complete work programmes;• there can be no guarantee that partners will operate projects in a manner aligned to theEnlarged Group’s interests and that partners could act exercise veto rights or otherwise act in amanner which prevents the Enlarged Group from acting in its own best interests;• the Enlarged Group in some instances holds minority positions in joint venture agreements andtherefore cannot control decision making;• there may be limits on the ability to exit joint venture arrangements;• there may be additional calls on the Enlarged Group’s financial resources, and if the Enlarged Groupdoes not make payment, the Enlarged Group’s interest would be diluted or lost; and• budgets may not fall under the Enlarged Group’s control.Actions of third parties, including contractors and partnersThe Enlarged Group will be reliant to an extent on third parties to provide contracting services. There canbe no assurance that these business relationships will continue to be maintained or that new ones will besuccessfully formed. A breach or disruption in these relationships could be detrimental to the futurebusiness, operating results and/or profitability of the Company. To the extent that the Enlarged Groupcannot engage contractors according to its plans and budgets, its profit may be adversely impaired.41

Taxation RiskAny change in the Enlarged Group’s tax status or the tax applicable to holding Ordinary Shares or intaxation legislation or its interpretation, could affect the value of the investments held by the EnlargedGroup, affect the Enlarged Group’s ability to provide returns to Shareholders and/or alter the post-taxreturns to Shareholders. Statements in this document concerning the taxation of the Enlarged Group andits investors are based upon current tax law and practice which is subject to change.Overseas securities lawsThe Placing Shares have not been nor will they be registered under the US Securities Act or the securitieslaws of any other jurisdiction. Subject to certain exceptions, the Placing Shares may not be offered, sold,delivered, pledged or otherwise transferred in any jurisdiction where such registration may be required.43

PART IIIINFORMATION ON THE BUSINESS OF THE STELLAR GROUP1. IntroductionStellar was incorporated in Guernsey on 2 May 2007 and is a focussed diamond exploration, productionand development company with a portfolio of properties in West Africa. The Mandala alluvial diamondproject in south east Guinea began bulk sampling in April 2009. In Sierra Leone Stellar holds two keyproperties: the Kono project (49 per cent. ownership) in joint venture with Petra Diamonds Limited(51 per cent.) and the Tongo Project (100 per cent. ownership). Both these projects are host to highgrade kimberlite dyke systems that demonstrate economic potential.Stellar assetsSource: StellarSummary table of Stellar resourcesLower Minimum Minimum Diamond Est. DiamondScreen Gravel Grade Resource ValueResource Class Project Size Tonnes (cpht) (cts) (US$/ct)Measured Mandala 1.7mm 213,000 34.6 147,000 30.73Indicated Mandala 1.0mm 1,419,000 18.7 529,000 30.73Inferred Ouria 1.0mm 300,000 38.09 114,000 30.73Inferred Bouro N. 1.0mm 108,000 182.5 196,000 30.73Inferred Kono-Pol-K 0.8mm 26,000 37.31 10,000 84.91Inferred Kono-Bardu 0.8mm 26,000 27.90 7,000 51.84Inferred Tongo Dyke 1 0.8mm 27,000 89.79 24,000 100.00Inferred Tongo Dyke 4 0.8mm 27,000 99.79 27,000 100.002. Key StrengthsThe Existing Directors and Proposed Directors believe that Stellar has a number of key strengths whichwill be important to the future development and growth of the Enlarged Group. These are:Local knowledge, including strong government and community relations in West AfricaStellar, through its historic relationship with African Aura and management and operational experiencein the region will benefit from local knowledge in the countries in which it operates in West Africa anda strong understanding of local geology. Regional offices, staffed by skilled and qualified nationals,44

have long been established in Conakry (Guinea) and Freetown (Sierra Leone) as well as the projectareas of Kono and Mandala. Each country has a local senior manager who has over time establishedclose relationships with their respective Ministry of Mines and forged strong relationships with the localcommunities where Stellar operates.Track record of discovery and developmentStellar has been operating in West Africa for the past 10 years (initially through African Aura). Over thistime the core geological team has made a number of significant discoveries. Two of these, Kono andTongo, will be subject to advanced exploration and development as Stellar seeks to establish their futureeconomic potential. At Mandala, Stellar has established a state-of-the-art alluvial diamond operationwithin four months, under challenging conditions and has produced over 50,000 carats to date. Thisinvaluable experience will prove beneficial for the development of future mines in the region.A diversified project base at various stages offering broad based opportunitiesThe Existing Directors and Proposed Directors believe that Stellar’s portfolio is balanced and has thepotential for additional growth though discovery on its exploration properties. Mandala has alreadycommenced trial mining, whilst Tongo and Kono represent significant advanced exploration opportunities.Strong board with significant industry experienceThe board of Stellar has a strong combination of technical and financial skills. The CEO, Karl Smithson,has worked in West Africa for 10 years and has been instrumental in the development of the currentportfolio of assets. The current board of Stellar brings with it many years of experience in the diamondsector from Angus Ogilvie and Paul Rankine, both of whom worked on De Beers mines in Botswana.There is a strong corporate background to the board led by the Chairman, Peter Daresbury, who haschaired companies on both AIM and the Main Market of the London Stock Exchange. Furthermore, thereis a strong entrepreneurial aspect to the Stellar board through Luis da Silva and Steven Poulton. TheStellar board has historically raised financing in excess of £10 million for Stellar, with all directors beingfundamentally involved in either supporting or participating in the various financings.3. StrategyThe recent strategy of Stellar has been a focus on delivery of profitable cash flow from its Mandalaproject. In the medium-term the Enlarged Group intends to recommence underground trial mining atKono and commence an underground bulk sampling exercise on the high-grade Tongo kimberlites. TheExisting Directors and Proposed Directors believe that both Kono and Tongo have the potential to beeconomic diamond mines under the right market conditions. They also believe that by advancing theKono and Tongo projects in the shorter term the Enlarged Group will position itself to benefit from thediamond market upturn that is forecast by many industry specialists in the medium to long term.The board of Stellar supports a strategy of growth by consolidation and acquisition in the diamondsector. Having profitable cash flow from two exploration projects in Guinea, with a series of high gradekimberlites under advanced bulk sampling and development, the Existing Directors and ProposedDirectors believe that the Enlarged Group will be in a strong position to deliver on this strategy.4. History and BackgroundStellar acquired its current portfolio of projects in Guinea and Sierra Leone in 2007 following ade-merger from African Aura. Karl Smithson, the Chief Executive of Stellar, joined African Aura as aconsultant in April 2000 and became an employee of the company in 2003. Since 2007, Stellar hasrelinquished a number of exploration stage projects in Liberia and Democratic Republic of Congofollowing extensive evaluation of resource potential and is now able to focus on its advanced andproducing assets in just two adjoining countries.Stellar has raised approximately £10.4 million via the issue of new Stellar Shares since 2007.The properties and underlying agreements are described in further detail in the CPR in Part VI of thisdocument and in paragraph 5 below.45

At the date of this document, Stellar has 50,659,129 ordinary shares in issue. The significantshareholders of Stellar are set out in paragraph 8.6 of Part X of this document.5. Overview of the PropertiesGuineaSummary table of Stellar properties held in GuineaAsset Licence Stellar Type of Expiry LicenceName No (1) Holder Interest Licence Date Area km 2 CommentsMandala A2008/014 Societe Ressources 100% Semi-industrial 25 Sept. 14.00 Bulk SamplingA2008/3640 Mandala Guinée diamond 2013 in ProgressSarlminingOuria A2008/013 Societe Ressources 100% Alluvial 25 Sept. 16.00 Bulk SamplingA2008/3639 Mandala Guinée diamond 2010 programSarl exploration scheduled tobegin March2010Bouro I A2009/280 Mano River 100% but 2% Kimberlite 23 Dec. 68.00 ExplorationA2009/3919 Diamonds Guinée royalty to De diamond 2011 plannedBeersexplorationBouro II A2009/280 Mano River 100% but 2% Kimberlite 23 Dec. 68.00 ExplorationA2009/3919 Diamonds Guinée royalty to De diamond 2011 plannedBeersexplorationBouro III A2009/280 Mano River 100% but 2% Kimberlite 23 Dec. 71.00 ExplorationA2009/3919 Diamonds Guinée royalty to De diamond 2011 plannedBeersexplorationDroujba I A2007/069II Friendship 100% Kimberlite 27 March 189.00 RenewalA2007/1290 Diamonds diamond 2009 (2) applicationsGuinée exploration lodged onreduced areasDroujba II A2007/069III Friendship 100% Kimberlite 27 March 189.00 RenewalA2007/1290 Diamonds diamond 2009 (2) applicationsGuinée exploration lodged onreduced areasNotes(1) Licence numbers in italics denote the ministerial decree licence number.(2) Renewal applications have been made. See further details on page 23.In Guinea, Stellar is focussed on exploitation of its Mandala property where a 676,000-carat measuredand indicated alluvial diamond resource has been established. Capital equipment was delivered andconstructed in early 2009 and mining commenced in April 2009. The Ouria property, adjacent toMandala, hosts a 114,000 carat inferred resource that will be tested in order to better define and enhancethe resource. The three Bouro licences host a series of east-west trending kimberlite dykes, some ofwhich carry high grade. A bulk sampling programme has been designed and will utilise the Mandalaproject plant and infrastructure once the programme is implemented. In addition, Stellar has applied forrenewal of two exploration licences over the Droujba kimberlite pipe. Early stage exploration andgeophysical survey have identified areas where new kimberlite discoveries are expected.Mandala, Ouria and Bouro PropertiesThese are alluvial and kimberlite licences owned by Stellar, consisting of five separate licences.Mandala and Ouria, which in total cover 30 km 2 , are both alluvial licences. Three kimberlite licences,termed the Bouro properties, extend over the Mandala and Ouria properties and give Stellar rights tothe kimberlites within the licence areas.46

Location of the Mandala & Ouria Alluvial (red) & Bouro (blue) Kimberlite licencesSource: StellarMandala LicenceStellar owns a semi-industrial alluvial diamond mining licence measuring 14km 2 in extent situated in theKerouane and Macenta Prefectures. The licence is valid until 25 September 2013, but renewable for afurther five year period.ResourcesTrial mining is currently underway on a 213,000m 3 at 0.6914ct/m 3 measured resource of gravel and a1,419,000m 3 at 0.373ct/m 3 indicated resource of gravel which taken together are estimated to contain676,600cts of diamond at an average value of US$30.73/ct.BackgroundA 100tph DMS plant has been installed at Mandala and mining commenced on 20 April 2009. Up to26 November 2009 224,792 diamonds weighing 43,414.7cts of diamond have been produced at anaverage grade of 0.80cts/m 3 . Over 2,100 stones of greater than 1 carat have been recovered, with the fivelargest diamonds weighing 31.33ct, 12.54ct, 12.44ct, 11.68ct and 10.93ct. The project is at the largebulk sampling/trial mining stage with the Southern block yielding better than predicted grades.Diamonds sales have been conducted through Natural Diamond Corporation, a diamond marketingcompany based in Antwerp, and Global Diamond Tenders based in Dubai. As at 30 November 2009,some 41,873.57cts of diamonds have been sold for $1,179,004, at an average of just over $28 per carat.On the same date some 1,932cts of diamonds were held in stock on site, valued at $26 per carat($49,280), whereas in Dubai three gems weighing 28.13cts valued at $1,125 per carat ($31,637)awaited sale. The diamond value for the project has fluctuated monthly dependent on the percentageand quality of gem diamonds in the sales parcels. The Existing and New Board expect the recentimprovement in the diamond market to impact positively on future sales prices achieved.Mandala requires a stock of critical spares and reliable earthmoving vehicles to double current productionrates to 10,000cts per month from January 2010 which the Existing Directors and Proposed Directorsbelieve should deliver a net profit to the Company.47

Work undertakenSince 2006, Stellar has:• Commissioned a topographic survey of the Mandala mining area;• Purchased a set of IKONOS satellite images to assist in the mapping process;• Commissioned a GIS study to estimate from the Star Guinée results what the volume of overburden,volume of diamondiferous gravel and diamond grade would be in each of the mining blocks;• Purchased, transported to site, erected and commissioned a 100-tonne per hour DMS diamondtreatment plant complete with a modern final recovery section in April 2009;• Purchased and transported to site necessary earth moving equipment to begin the bulk sampling /trial mining; and• Improved transport logistics in sections of the Macenta to Bouro area for improvedlogistical efficienciesFurther capital expenditure at Mandala should lead to an increase in production levels.Ouria LicenceStellar owns this exploration licence for alluvial diamonds along the Ouria river, which is adjacent tothe Mandala licence. It is an alluvial diamond exploration licence measuring 16 km 2 in extent. It is validuntil 25 September 2010, but renewable for two successive periods of two years.ResourcesOuria has a historical inferred resource estimate (Sutherland 2004) of 160,000 cts. over an area of200,000m 2 . This estimate has recently been reviewed downwards as a result of artisanal mining activitiessince 2004. The current inferred resource is 120,000cts over an area of 157,500m 2 (grade of 0.76ct/m 2 or38.09cpht) estimated to have a value of US$30.76/ct, similar to the current Mandala diamond value.BackgroundSamples taken by Star Guinée yielded results that showed the diamonds were on average rather smallerthan found in the Mandala project, but the quality was similar. The area is still at a very preliminarystage of evaluation.Stellar, as with its predecessor, SearchGold Resources, has not done any exploration work since theownership by Star Guinea ended in 2005.Funds obtained from the Placing will be used for further bulk sampling in the area.Bouro LicencesStellar holds three kimberlite exploration licences which extend over both the Mandala and Ouriaalluvial diamond licences and which measure 207 km 2 . The three licences are situated in the Macentaand Kérouané Préfectures and are valid until 23 December 2011.ResourcesThere is an inferred resource of 107,600 tonnes at between 182.5cpht and 400cpht in the Bouro Northdyke. However, the micro-and macro-diamond sampling work by De Beers, Mano and Stellar and fieldmapping of the lateral extent of the Bouro North dyke suggest a highly speculative exploration target ofsome 13 million tonnes hosting 20 million carats. The Bouro North Dyke diamonds are assumed to beof similar quality to the Mandala alluvial diamonds at a current value of US$30.76/ct.BackgroundThe dykes in the area have been shown to be composite dyke zones with diamond grade and qualityvarying between different dykes in different zones.Mapping of the dykes has indicated that the Bouro North dyke is the most extensive, showing high gradeestimates for it. The Directors and Proposed Directors believe that larger scale bulk sampling followedby underground trial mining of the Bouro North dyke is justified and should be pursued as a high priority.48

De Beers will derive a two per cent. royalty on gross sales interest if the Bouro dykes enter production.This was a result of a joint venture agreement with De Beers entered in 2007 that enabled Stellar toreview the De Beers’ Guinea exploration database on Bouro.Since 2005 Stellar has:• Acquired a set of Ikonos satellite colour images to assist in tracing the dykes;• Mapped the extent of the dykes with the main Bouro North dyke being traced semi-continuously;• Collected seven one tonne mini-bulk samples from the Bouro dykes from existing artisanalworkings; and• Submitted the Debsam micro-diamond results for an independent expert opinion as to suggestedgrade of the dykesFunds obtained from the Placing will be used for further bulk sampling in the area.Droujba LicencesLocation of the Droujba LicencesSource: StellarOwnership and LicencesStellar had previously held two kimberlite diamond exploration licences over the Droujba kimberlitepipe situated in the Macenta and Kérouané Préfecture.In 2007 WAD applied for a licence to explore for “diamonds and associated minerals” over the Droujbaarea and Stellar simultaneously applied for a licence to explore for “primary diamonds” over the samearea, and the Ministry of Mines in Conakry granted them both licences. Following appeals to the49

Ministry to adjudicate on/over the conflicting rights granted to the two parties, Stellar and WAD madea proposition to the Ministry that upon Completion of the Proposals the licences would be combined,but if the merger proposals were unsuccessful then a 50:50 joint venture would be established over bothlicences. The Ministry approved this approach.In addition both WAD and Stellar have recently submitted their respective applications for renewal oftheir licences and the Ministry has agreed to approve WAD’s application in the name of the EnlargedGroup upon Completion. The New Board will seek to ensure that such renewal covers all of the rightsapplied for by both WAD and Stellar and is confident of its grant, not least because such rights must berenewed under Guinean law.ResourcesThere is an estimated inferred resource of between 200,000 and 400,000 tonnes at a grade of80.08cpht, which equates to between 160,000 and 320,000cts. No modern valuation of diamondsfrom the pipe has been undertaken.BackgroundThere is exploration evidence to suggest that there may be new, as yet undiscovered, kimberlites withinthe licence area. The Droujba pipe kimberlites in Guinea are virtually unreported and futureexploration will be aimed at collecting data to estimate diamond grade, quality and value but also todetermine the lithological type(s), their relationship and confirming the Soviet Aid Mission’s estimateof the amount of country rock xenoliths as being between 10 per cent. and 20 per cent. by volume. Inaddition, the colluvial and alluvial potential of the Droujba licence area still needs to be tested.Preliminary indications from Sutherland indicate that these will be positive.Since 2007, Stellar and WAD have separately completed the following exploration of the licence area:• Stellar has undertaken a ground geophysical survey over a known kimberlite dyke, theKasablanca Dyke;• During 2008 Stellar collected some 306 stream sediment samples for Kimberlite IndicatorMaterials over its original three licence areas and further loam samples over a heavily mined(artisanal diggings) area;• WAD commissioned a review report by Sutherland (Sutherland, 2008) of the entire BounoudoDiamond District which records and considers the results of all the historical exploration andmining in the District with conclusions and recommendations for further exploration work;• WAD completed a ground geophysical survey on the Droujba kimberlite pipe;• WAD completed 164.3m of core drilling in 14 holes in and around the Droujba pipe in an attemptto define the limits of the kimberlite below the overburden; and• WAD transported a mobile 5 tonne per hour DMS sample processing plant to site at the Droujba pipe.Funds obtained from the Placing will be used for further bulk sampling in the area.Sierra LeoneSummary table of Stellar properties held in Sierra LeoneAsset Licence Stellar Type of Expiry LicenceName No Holder Interest Licence Date Area km 2 CommentsKono EXPL 3/05 Basama Diamonds 49% Diamond 31 103.00 Trial Mining onProject I (Sierra Leone) Ltd Exploration January care &2011 maintenanceawaitingrecovery ofdiamond pricesKono EXPL 4/05 Basama Diamonds 49% Diamond 31 103.00 Trial Mining onProject II (Sierra Leone) Ltd Exploration January care &2011 maintenanceawaitingrecovery ofdiamond pricesTongo EXPL 5/07 Sierra Diamonds 100% Diamond 6 33.12 Trial MiningProject (Sierra Leone) Ltd Exploration August scheduled for2011 201050

Stellar holds rights in three diamond licences in Sierra Leone, covering an area of some 239 km 2 .Two exclusive prospecting licences, located in the renowned diamond district of Kono, are the subject of ajoint venture with Petra, where underground trial mining has yielded potentially economic diamond grades.The Kono area of Sierra Leone is renowned for the quality of diamonds produced. The 970-carat Starof Sierra Leone was recovered from the area and regular discoveries of 100-carat plus diamonds aremade. It is estimated that total diamond production from the Kono area is in excess of 9 million carats.Further to the south, Stellar explored a 9,700 square kilometre area from 2004 to 2007. This area hasnow been reduced to a single exclusive prospecting licence in the Tongo area which hosts high-gradekimberlite dykes.Kono ProjectLocation of Kono ProjectSource: StellarOwnership and LicencesThe two Kono exploration licences are valid to 31 January 2011 and held by a joint venture company,Basama Diamonds (SL) Ltd., which is owned 51 per cent. by Petra Diamonds Limited (“Petra”) and49 per cent. by Stellar.On 20 December 2008 Stellar agreed to assume sole funding of the Kono project for the duration of 2009and assumed the role of manager and operator of the project. Petra has informed Stellar that it will electnot to reimburse Stellar 51 per cent. of 2009 expenditure and therefore intends to dilute according to thedilution clause in the joint venture agreement. Stellar and Petra have agreed to negotiate the relevantpercentage dilution in good faith and to extend the maturity of Petra’s loan of $689,688 to the end ofFebruary 2010, which arose when Petra assumed sole funding of the Kono project for the duration of 2008.Petra has informed Stellar that it will not contribute 51 per cent. of 2009 project expenditure and willtherefore dilute its interest in the Kono project. Stellar would therefore become the majority owner ofthe Kono project. The exact equity holdings will be calculated once final 2009 expenditure has beencompiled by Stellar. Stellar and Petra are currently in negotiations regarding the potential acquisition byStellar of Petra’s remaining project equity.51

ResourcesStellar’s attributable inferred resource for the Pol-K and Bardu shaft areas of 23,500 tonnes at 37.31cpht(8,768cts) for Pol-K and 16,700 tonnes at 27.90cpht (4,659cts) for Bardu. The diamonds are valued atUS$84.91/ct for Pol-K and US$51.84 for Bardu based on selling prices achieved. Note that these pricesrepresent sales during the market downturn of 2009 and that a parcel of 880 carats of Pol-K diamondssold for US$152 per carat in September 2008.Sobie and McGeorge in 2008 estimated a speculative total exploration target from 713,000 to 5.88million tonnes containing some 356,000 to 4.7 million carats for the two dykes, and the ExistingDirectors and Proposed Directors believe that there is still considerable potential in the Kono project.BackgroundStellar has mapped 10 separate kimberlite dykes, the Lion Dykes, over a total strike length of some17km. Following dyke sampling, exploration has been focussed on trial mining of the most promisingdykes, Lion 2, 3, 5 & 7 with results from it showing:• Lion Dykes 3 & 5 have the best diamond potential;• Lion Dyke 5 (94 cpht) and the eastern portion of Lion Dyke 1 (66 cpht) have the best indicationsof commercial potential;• The mini-bulk sampling of Lion Dyke 3 and trial mining yielded poor results; and• Lion Dykes 5 (Bardu shaft) and 7 (Pol-K shaft) have shown that their fully diluted, run-of-minegrades range between 28 and 38 cpht, that the average stone size is likely to be 0.08 cts./stoneAt Pol-K the shaft is currently at a depth of 81m. Trial stope mining between the 32m and 64m levelhas consistently returned in-situ grades of 66cpht for the kimberlite. The three largest diamondsrecovered weighed 11.95ct, 11.54ct and 10.55ct.At Bardu, sampling along the development drive at 45m has yielded grades of 65cpht. However, thegrade recently increased significantly to 140cpht as the kimberlite dyke widened to over 3m.Three diamond sales have been made to test market conditions. In September 2008 a parcel of 810 caratsfrom Pol-K sold for US$152 per carat. In May 2009 however, a parcel of 2,694 carats from both Barduand Pol-K realised only US$46 per carat, reflecting the weakness of the diamond market at that time. InJune 2009, a small parcel of 271 carats from Bardu and Pol-K sold for US$85 per carat, indicating aslightly stronger diamond market.In May 2009, the joint venture partners decided to cease active trial mining due to the poor state of thediamond market and place the project on care and maintenance. As market conditions improve this decisionwill be reviewed.Work undertakenSince 2005, Basama has:• Continued the sampling and location programme initiated by African Aura in 2002, locating theLion-1 to Lion-10 and associated dyke systems;• Completed an airborne DIGHEM survey over the two licences in order to try to trace the extentof the dykes and eliminate the possibility of significant undiscovered kimberlite pipes;• Constructed, transported and erected on the foundations of the original SLST power station siteat Yengema, an exploration camp, a 75tph DMS diamond recovery plant;.• Sunk the Pol-K (Lion-7), Bardu (Lion-5), Lost (Lion-5), Black Rock (Lion-3), Bakarr (Lion-2)and Palm (Lion-2) vertical trial mining shafts to explore and evaluate the commercial mining ofthe various dykes; and produced 4,213.64 carats of diamonds from shaft, development and trialmine stope material;• Commissioned a statistical evaluation of diamond sizes and values from parcels of stones fromthe Bardu and Pol-K shafts.52

Tongo ProjectLocation of Tongo ProjectSource: StellarOwnership and LicencesStellar has a 100 per cent. interest in an exploration licence for diamonds covering an area of 33.12 km 2in south-eastern Sierra Leone, valid until 16 August 2011.The exploration of the greater region and of this licence was the subject of a joint venture with BHP-BillitonWorldwide Exploration which invested some US$3 million in the project but subsequently withdrew,leaving Stellar with 100 per cent. interest.ResourcesAn inferred resource of 26,500 tonnes at a grade of 89.79cpht (23,794cts) has been estimated for kimberliteDyke-1 and 26,500 tonnes at a grade of 99.79cpht (26,444cts) for kimberlite Dyke-4. The Dyke-1 diamondsare valued at US$150/ct and Dyke-4 diamonds at US$50/ct based on a very small parcel.BackgroundExploration to date has defined four kimberlite dykes, Dykes 1- 4, from which 24 mini-bulk samplesof some 1 tonne each were excavated and yielded high quality diamonds with indicative samplinggrades of up to 385 cpht. Six samples were also submitted for micro diamond analysis and indicategrades in excess of 500 cpht.A total of 20 inclined core drillholes totaling 1219.4m has shown lateral continuity of the dykes to shallowdepth and two bulk samples of Dykes 1 & 4 (144.45 tonnes and 53.82 tonnes) indicate grades of 90 cpht forDyke 1 and 100 cpht for Dyke 4 (Sobie & McGeorge, 2008 and Oosterveld 2007 & 2009). These are positiveresults having identified promising dykes and indicated encouraging grades and high value diamonds.Ground geophysical surveys and drilling was completed prior to a micro diamond sampling programmewhereby six samples of 200kg each were collected and processed at an independent laboratory in SouthAfrica. Some 1,894 diamonds (2.05 carats) were recovered, of which 49 diamonds were >0.85mm insize. An independent diamond expert has estimated that the macrodiamond grade may be as high as300cpht to 500cpht for some of the kimberlites sampled.53

Dykes 1 & 4 have the best potential for producing commercial diamond grades of the order of 100 cpht.with a real probability of producing occasional very large diamonds (Oosterveld, 2009). Two bulksamples were collected from these dykes and returned 183.4 carats, including 10 diamonds over 1 caratand a 4.98 carat diamond, for grades of around 100cpht. All these diamonds were classed as gem qualityby the government value, and valued at US$189 per carat upon export to Antwerp in November 2008.However, it is Stellar’s opinion that a current, conservative average value of US$100/ct could be appliedto the Tongo production based on current price trends. There could be further potential upside todiamond values as the market improves.A more comprehensive bulk sampling exercise is now warranted in order to determine with moreconfidence the grade and value of the kimberlites tested to date. This will include the sinking of shaftsand sampling by underground development drives and trial stope mining.The licence area has already been thoroughly explored by stream, loam and rock sampling, by mappingof artisan activity and by ground EM and thus remains a very low probability that further kimberlitedykes or pipes could still be discovered.Since August 2007, the following exploration has been completed by the joint venture partners and afterMarch 2008, by Stellar:• Reconnaissance & detailed follow-up stream sampling for kimberlite indicator minerals over theentire licence area with the objective of finding additional kimberlites;• Geological mapping of known and newly found Kimberlite dykes including mapping of thedrainage patterns & other surface geology;• Pitting over known kimberlite dykes to determine their lateral extent;• Grab sampling of known kimberlites for Indicator Mineral extraction and, if justified,microprobing of grains to determine their mineral chemistry;• Grab sampling of kimberlite dykes and processing for diamond recovery;• 6 x 200kg kimberlite samples collected for micro diamond extraction and estimation of diamondgrade & size frequency analysis;• Ground Geophysics (EM) survey and anomaly generation for determination of dyke extensions;• Pitting & trenching of (EM) anomalies (target resolution);• Drilling of 1,219m in 19 holes sited to test (EM) targets and some known dykes (target resolution);• Pitting and trenching. Site selection for mini bulk sampling exercise;• Mini bulk sampling for kimberlite grade determination and valuation; and• Macro diamond statistical analysisFunds from the Placing should enable the establishment of underground shafts and drives from whichto undertake large scale bulk sampling.54

PART IVOVERVIEW OF DIAMONDS AND DIAMOND EXPLORATION1. Diamond Formation and DistributionSpecific conditions are required to form a diamond from its natural state of carbon. These conditionsinclude high pressures in excess of 40 kilo-bars and temperatures of between 900°C to 1,300°C in theupper mantle, some 150km to 200km below the surface of the Earth. These conditions were restrictedto thick keels of the Earth, known as Cratons, which are ancient slabs of continental crust more than2.5 billion years old. All known ‘primary’ diamond mines are located on Cratons.Diamonds are brought to the surface by kimberlite or lamproite, the only two known ‘primary’ sourcerocks of diamonds. Kimberlite, however, is the most common source. These kimberlites or lamproiteswere initially formed by partial melting of the upper mantle, resulting in an ultramafic magma whichrapidly ascended to the surface of the Earth. During such ascension, these magmas picked up diamondsfrom the upper mantle and carried them to the surface during the eruption process.Source: RBC, 2007Kimberlites are typically carrot shaped intrusives or ‘pipes’ that can range in size from tens of metresup to 2 kilometres in diameter. The upper part of the pipe is called the crater facies and with increasingdepth the pipe grades into what are termed the volcaniclastic and magmatic facies, the latterrepresenting the ‘root’ of the pipe. The deepest roots of the pipe manifest themselves in dykes (fissures)or sills. The presence of a particular facies of kimberlite indicates the levels of erosion that have takenplace since intrusion. For example, if a kimberlite pipe in the hypabyssal facies is discovered at thesurface then it could be assumed that perhaps 1km to 2km of the pipe has been eroded and the diamondsit contained would have been redistributed into secondary alluvial (placer) or marine deposits.55

Kimberlite Ore BodySource: RBC, 20092. Kimberlite ExplorationThere are many stages in the exploration for kimberlites and diamonds, involving a variety oftechniques. These can include, but are not limited to, geochemical sampling, geophysical surveys,geochemistry studies, remote sensing studies and drilling. Once a discovery is made, the kimberlite istested for diamond content through microdiamond analysis followed by mini-bulk sampling and largerscale bulk sampling. The objective is to determine the macrodiamond grade (commercial sizeddiamonds of >1 mm) and diamond value. It is these two parameters that ultimately determine whetherthe kimberlite is likely to be economic.Although kimberlite occurrences are relatively common, with over 4,000 known, only 10 per cent. ofthese are diamondiferous and only 1 per cent., or 40, contain diamond in sufficiently economicquantities to be mined. However, the returns on economic kimberlites can be very high, with somemines having annual production values in the hundreds of millions of dollars.3. Alluvial Diamond DepositsAlluvial diamonds are originally derived from erosion of the primary source rocks of kimberlite orlamproite. These diamonds are transported in rivers and ultimately could be deposited in a marineenvironment. Alluvial diamonds tend to be of higher average value than primary sources. However, thegrade of an alluvial resource is often lower than for kimberlite and the resource estimation is moredifficult to ascertain due to the high variability of grade. Nevertheless, the typical low operating cost ofan alluvial mine does make many of these resources economically viable.4. Uses of DiamondsOf the world’s annual diamond production, some 20 per cent. is of gem quality, 45 per cent. is ofnear-gem quality and 35 per cent. is industrial. Most of the gem and near-gem diamonds are used in thediamond jewellery market. Gemstone diamonds are stones with color and clarity that make themsuitable for jewellery or investment use. Gemstone diamonds are sold for their beauty and quality.Industrial diamonds are mostly used in cutting, grinding, drilling and polishing procedures. Here,hardness and heat conductivity characteristics are the qualities being purchased. Size and other56

measures of quality relevant to gemstones are not important. Industrial diamonds are often crushed toproduce micron-sized abrasive powders. Large amounts of diamonds that are gemstone quality but toosmall to cut are sold into the industrial diamond trade.5. Diamond Supply and DemandThe Mining Journal (2009) describes the onset of the global financial crisis having a disastrous effecton the US Christmas diamond sales in 2008, which, in some cases, fell as much as 25 per cent. belowthe previous year. To alleviate this situation, De Beers closed its four diamond mines in Botswana (theworld’s top producing country). Other companies such as Rio Tinto and BHP Billiton also introducedsix-week-long holidays over the Christmas/New Year season in their Canadian mines, but resumedoperations during February to mid-April 2009. As the recession deepened in the first quarter of 2009,most commercial alluvial mines around the world closed and the majority of exploration projects,especially in Angola and the Democratic Republic of the Congo were terminated or drastically curtailed.The value of rough diamonds dropped by 40-65 per cent. compared with the middle of 2008, but byApril 2009 the worst appeared to be over and prices started to rise.According to the Mining Journal a substantial supply shortfall is predicted after 2012, when the curvesfor production and demand for rough diamonds will start to diverge again. Global diamond productionin 2008 decreased by only 4 per cent. to 162.9Mct, as the first three quarters were strong before thedownturn in the December quarter. Botswana is still the world leader by production value(US$3.27 billion), with Russia the largest producer by volume (36.9Mct). The value of mine productionfor 2008 was estimated to be US$12.7 billion, worth US$18 billion in polished goods and US$64 billionin retail terms.Diamond Production (2008)Volume Unit Value ValueCountry (Mct) (US$/ct) (US$bn)1. Botswana 32.3 101.41 3.272. Russian Federation 36.9 67.95 2.513. Canada 14.8 152.32 2.254. South Africa 12.9 95.82 1.245. Angola 8.9 135.83 1.216. Namibia 2.4 376.99 0.927. Congo, Democratic Republic of 33.4 12.93 0.438. Australia 14.9 21.86 0.339. Lesotho 0.3 879.97 0.2210. Sierra Leone 0.4 266.05 0.10Other 5.7 44.17 0.25Totals 162.9 78.16 12.73Source: Kimberley Process Certification Scheme, 30 July 200957

Source: Charles Wyndham of WWW International Diamond Consultants6. Kimberley Process Certification Scheme (“KPCS”)The KPCS is a joint government, international diamond industry and civil society initiative to stem theflow of conflict diamonds (diamond revenues used to fund rebel wars). The KPCS imposes stringentrequirements on all participants to guard against conflict diamonds entering the legitimate trade.Participants are required to implement internal controls, as outlined in the KPCS document, and allshipments of rough diamonds must be accompanied by a KPCS certificate.Guinea and Sierra Leone are both members of the KPCS, and both WAD and Stellar have strict internalcompliance rules for the export of its production, which adhere fully to the KPCS.58

PART VOVERVIEW OF COUNTRIES1. GuineaOverviewGuinea, officially the Republic of Guinea, is a presidential republic in West Africa, formerly known asFrench Guinea. The country borders Guinea-Bissau and Senegal to the north, and Mali to the north andnorth-east; the inland part borders Côte d’Ivoire to the south-east, Liberia to the south, and Sierra Leoneto the west of the southern tip. Its water sources include the Niger, Senegal, and Gambia rivers. Thecapital is Conakry and the population is approximately 10 million people.Guinea was created as a colony by France in 1890. After independence in 1958 Guinea severed ties withFrance and turned to the Soviet Union. The first president, Ahmed Sekou Toure, pursued a revolutionarysocialist agenda and crushed political opposition. Tens of thousands of people disappeared, or weretortured and executed, during his 26-year regime. Economic mismanagement and repression culminatedin riots in 1977. These led to some relaxation of state control of the economy. But it was only after thedeath in 1984 of Ahmed Sekou Toure, and the seizure of power by Lansana Conte and other officers,that the socialist experiment was abandoned – without reversing poverty.In 2000 Guinea became home to up to half a million refugees fleeing fighting in Sierra Leone andLiberia. This increased the strain on its economy and generated suspicion and ethnic tension, amidmutual accusations of attempts at destabilisation and border attacks.EconomyGuinea has significant natural resources – half of the world’s bauxite deposits, as well as important diamond,gold and iron ore resources – with minerals representing 70 per cent. of exports. Over 76 per cent. of the labourforce is primarily engaged in agricultural activity producing coffee, rice, pineapples, sweet potatoes, palm oil,cassava and bananas as well as raising animals. Guinea imports petroleum products, metals, machinery andsome foodstuffs. An absence of reliable water services and electricity has hampered business development.Political stabilityGuinea is headed by President Moussa Dadis Camara, a Captain of the Guinea Army who assumedpower in December 2008 upon the death of then President Conte. This was classified as a coup in theeyes of the international community, but the transition was peaceful and it importantly ensured stabilityin the country at that time when there was no natural successor. President Camara has undertaken tohold democratic elections by early 2010, and there is currently some debate as to whether he will puthimself forward as a candidate. Inevitably in the run up to elections there will be sporadic outbreaks ofviolence, most likely restricted to Conakry. This is not unlike much of Africa at times of election.On 3 December 2009, President Camara was wounded in an assasination attempt by men under thecommand of his aide-de-camp and was flown to Morocco where he is recovering from the injuries.Reports suggest that President Camara is unlikely to return to Guinea in the near future andVice-President (and defence minister) Sékauba Konaté has been appointed acting President. Konaté hasinvited the leaders of the opposition parties to appoint a Prime Minister and to form a unity governmentuntil elections can be held.Guinea’s government has taken a publicly strong anti-corruption stance but the success and longevity ofthis remains to be seen.59

Diamond Mining Production – GuineaSource: Kimberley Process Certification Scheme, 30 July 20092. Sierra LeoneOverviewSierra Leone, officially the Republic of Sierra Leone, is a constitutional republic nation in West Africawith a directly elected president, a one chamber legislature and an independent judiciary, comprisingthree Provinces and one Area. It is bordered by Guinea on the north and Liberia on the south, with theAtlantic Ocean on the west. The capital is Freetown and the population is approximately 5.7 millionpeople. The country is a former British colony having gained independence in 1961.Sierra Leone is emerging from a protracted civil war between various rebel groups and is showing signsof a successful transition. Since the cessation of hostilities in January 2002, massive infusions of outsideassistance, from Britain, the EU and UN have helped Sierra Leone begin to recover. Investor andconsumer confidence continue to rise, adding impetus to the country’s economic recovery. In additionto this there is greater freedom of movement and the successful re-habitation and resettlement ofresidential areas.EconomyRich in minerals, Sierra Leone has relied on the mining sector in general, and diamonds in particular,for its economic base. Mineral exports are Sierra Leone’s principal foreign exchange earner.Sierra Leone is a major producer of gem-quality diamonds. Annual current production in 2008 was over370,000 carats per year, valued at US$98.8 million. Sierra Leone also has one of the world’s largestdeposits of rutile, a titanium ore used as paint pigment and welding rod coatings as well as bauxite,iron ore and gold. Although mining is the principle exporter, about two-thirds of the population engagesin subsistence agriculture, which accounts for 52.5 per cent. of national income.Sierra Leone has experienced substantial economic growth in recent years, although poverty andunemployment remain major challenges. In June 2009, the UN said that despite some impressive gainsin rebuilding since the end of the civil war, efforts to consolidate peace and prosperity in the countryremained fragile. Economic recovery has been slow partly because the reconstruction needs are sogreat. Around half of government revenue comes from donors.Political stabilitySierra Leone emerged from over a decade of civil war in 2002. Since that time an initial UN sponsoredpeace programme has been followed by two free and fair democratic elections, with the last electionreturning the All People’s Congress (APC) opposition party to power. The fact that the then rulingSierra Leone Peoples Party (SLPP) Government handed over power to the opposition demonstrated thecountry’s growing democratic maturity. The country still enjoys international community support interms of aids and development grants. However, it is important that the Government tackles the highunemployment rate and is seen to be delivering on its election promises.60

Diamond Mining Production – Sierra Leone0.800.600.69 0.670.60 0.60150.0125.0100.0126.7141.9125.3141.698.8(mcts)0.400.200.37(US $m)75.050.025.00.000.02004 2005 2006 2007 20082004 2005 2006 2007 2008Source: Kimberley Process Certification Scheme, 30 July 20093. Summary of Guinea and Sierra Leone Mining CodesRule of LawSierra Leone is governed by a British based legal system, whereas in Guinea the law is French based. BothMining Codes are acceptable and relatively competitive when compared to some other African countries.In both countries a company has the absolute right to convert exploration title to mining title subject tocertain criteria being met (such as delivering feasibility and environmental impact assessment studies).Sierra Leone Mining LawThe Government of Sierra Leone has recently enacted the Mines and Minerals Act 2009 (the ‘2009Act’) which replaces the Mines and Minerals Act 1994 (the ‘1994 Act’).Exploration Licences and RenewalsAn exploration licence can be granted for a period not exceeding four years (previously three yearsunder the 1994 Act) with the right to apply for renewal for a further period of three (previously two)years and subsequently a further two years. The area which is the subject of the first renewal shall notexceed 125 km 2 unless the Minister of Mineral Resources, on the advice of the Mineral Advisory Board,otherwise permits.Application for a mining lease by the holder of an exploration licenceWhere the holder of an exploration licence applies for a mining lease over an area in or whichconstitutes the exploration area and the application has not been dealt with before the date on which thelicence would have expired, the exploration licence continues to have effect over that area until themining lease is granted or the application has been otherwise fully disposed of.Large Scale Mining LeasesApplications for a large scale mining lease must:(a)(b)(c)(d)(e)state the period, not more than twenty-five years, for which the lease is sought;contain the company profile and history of exploration operations in Sierra Leone and elsewhere;be accompanied by a statement giving particulars of the proposed programme of miningoperations, a detailed forecast of capital investment, operating costs and revenue and theanticipated type and source of financing and the estimated costs.;be accompanied by an environmental impact assessment as may be required by the Minister ofMineral Resources; andset out the applicant’s proposal with regard to the employment and training of Sierra Leone citizens.RenewalsA large scale mining licence can be granted for a period not exceeding twenty-five years or theestimated life of the ore body proposed to be mined, whichever is shorter, with the right to apply forrenewal for a further period not exceeding fifteen years.61

Subsection (3) of section 178 of the 2009 Act provides that mineral rights (such as the explorationlicences granted under the 1994 Act) shall subsist until their expiration. Subsection (5) provides that nomineral right granted under the 1994 Act shall be extended or renewed but where such mineral rightprovided a right to apply for renewal or extension of that right, the holder of that mineral right mayapply, subject to the 2009 Act, for a similar type of licence as provided for under the 2009 Act.Guinean Mining CodeThe Guinean Mining Code was promulgated on 30 June, 1995 (the “Guinean Mining Code”). Pursuantto the Guinean Mining Code, the following rights are conferred subject to the obligations and conditionsset out below:Rights ConferredAn operating licence (industrial or semi-industrial) confers on its holder the exclusive right to search,prospect, develop and freely dispose of the mineral substances for which it is issued, within the limitsof its perimeter and without limitations of depth.An exploration licence (industrial or semi-industrial) confers on its holder the exclusive right toprospect for mining substance(s) for which the licence is issued.A person may hold more than one licence.Term and RenewalAn industrial operating licence is issued for a maximum of ten (10) years and a semi-industrial operatinglicence is issued for a maximum of five (5) years. The term of an operating licence is renewable forseveral periods of five (5) years or more, under the same conditions as its original grant, when the holderhas met all obligations incumbent upon him upon during the issuance or renewal of the title.Exploration licences (industrial and semi-industrial) are granted for a variable length according to theimportance of the operations concerned. Exploration licences are issued for a maximum term of three(3) years for industrial-scale exploration and two (2) years for semi-industrial scale exploration. Thelicence is renewed by operation of law if the holder has met all its obligations. Its application for renewalsets out a minimum program of work building on the results of the preceding period and representing afinancial effort at least equal, for the corresponding time period, to that set out in the original licence.The industrial exploration licence can be renewed twice and under the same conditions of the first licenceand for a period of two (2) years each time. The semi-industrial licence can be renewed only once for aperiod of one (1) year. During each renewal, the surface area of the licence is reduced by the half.Withdrawal or revocation of Mining Licences:Mining licences may be revoked, before their expiry date, by the issuing authority for one the followingmotives or grounds:• Failure by the holder to observe or respect the obligations set out in the licence;• Exploration activities being suspended for more than six months;• When the feasibility study shows the existence of an economically and commercially operabledeposit within the exploration perimeter but no development follows within the thirty-six(36) months;• Violation of one of the provisions of the Guinean Mining Code;• Expenses of the title holder are less over a total of two consecutive years than the whole of theminimum program for works or the minimum amount of expenses forecast for such period by themining title;• Failure by the holder to keep registers relating to extraction, sales and shipping or a refusal toprovide such registers to the qualified agents of the “Direction Nationale des Mines”;• Failure to pay taxes or duties due;62

• Exploration activities outside the perimeter relating to the licence or exploitation activitiesundertaken without a exploration licence;• Loss of the financial guarantees or loss of technical capacities which constituted performancewarranties by the holder; and• Assignment, transfer or sub leasing of mining rights without prior approval or authorisation.The withdrawal or revocation can only take effect after failure to comply with a formal notice sent bythe Ministry of Mines and Geology giving a period of not less than two (2) months for the explorationlicence and three (3) months for the operating licence in which to remedy the breaches.4. Geology and MiningBoth countries share the same Archaean based geology which is very much underexplored andunexploited. The development of world class iron ore and bauxite reserves will drive the futurerehabilitation of key infrastructure in the region. The recent rumours of a multi-billion barrel oildiscovery in the shallow waters offshore of Sierra Leone could change the face of the countrysignificantly in the future.The presence of these unexploited natural resources has led to the long term presence of majorcompanies such as Rio Tinto, BHP Billiton, AngloGold Ashanti, Rusal, Alcoa etc, which have investedsignificantly and will continue to do so as project development continues.Although the diamond resources in the west African region are not as substantial as those of southernand central Africa, the potential for small to mid-tier diamond companies is significant and the lack ofcompetition currently presents numerous opportunities.63

PART VICOMPETENT PERSON’S REPORT27 January 2009The DirectorsStellar Diamonds LimitedNerine HouseSt. Peter PortGuernseyGY1 32GRBC Capital Markets71 Queen Victoria StreetLondonEC4V 4DEGentlemen,Stellar Diamonds Limited / West African Diamonds plcCompetent Person’s Report (the “Report”)The DirectorsWest African Diamonds PLC20-22 Bedford RowLondonWC1R 4JSMPH Consulting Limited (“MPH”) has been retained by Stellar Diamonds Limited (“Stellar”),West African Diamonds plc (“WAD”) and their nominated advisors RBC Capital Markets (“RBC”) tocomplete a Competent Person’s Report on Stellar’s and WAD’s diamond properties located in theRepublics of Guinea and Sierra Leone, West Africa.It is proposed that the Report will be published in an admission document in connection with theCompany’s admission to AIM. Therefore, the Report is prepared in accordance with the Guidance Notefor Mining, Oil & Gas Companies issued by the London Stock Exchange in June 2009.The Report, which this letter introduces, should be referred to in its entirety for the full descriptionof each asset and associated material liabilities, the data available to us, our evaluation methods, andour qualifications.We confirm that we have reviewed information contained elsewhere in the Admission Document whichrelates to information contained in the Report and confirm that the information presented therein hasbeen extracted directly from the Report in a manner which is not misleading, is accurate and providesa balanced and complete view which is not inconsistent with the Report.We confirm that there has been no material change of circumstances or available information since theReport was compiled and we are not aware of any significant matters in connection with our evaluationthat are not covered by the Report which might be of a material nature.Paul Sobie, P.Geo., PresidentMPH Consulting Limited133 Richmond St. W. Suite 501, Toronto, Ontario, Canada M5H 2L3Tel: (416) 365 0930 Fax: (416) 365 1830email: mph@mphconsulting.com64

COMPETENT PERSON’S REPORTON A PORTFOLIO OFDIAMOND EXPLORATION PROPERTIESIN SIERRA LEONE AND GUINEA, WEST AFRICAFORSTELLAR DIAMONDS LIMITEDWEST AFRICAN DIAMONDS PLCANDRBC CAPITAL MARKETSDecember 23, 2009Capetown, South AfricaToronto, CanadaPeter W. A. Walker B.Sc.(Hons.), MBA, Pr.Sci.Nat.Paul A. Sobie B.Sc., P.Geo65

TABLE OF CONTENTS1. EXECUTIVE SUMMARY 721.1 Preamble 721.2 Introduction 721.3 Properties 731.4 Geology 731.5 History 731.6 Diamond Exploration to Date 731.7 Resource Statement 741.8 Conclusions and Recommendations for Further Work 761.9 Budgeted Exploration Expenditure 792. INTRODUCTION AND TERMS OF REFERENCE 822.1 Principal Sources of Information 822.2 Site Visits 842.3 Qualifications and Independence of MPH and the Authors 842.4 Disclaimer & Reliance on Other Experts 852.5 No Material Change 863. REGIONAL GEOLOGY, RESOURCES & EXPLORATION METHODOLOGY 863.1 Regional Geology 863.2 Resources 873.2.1 Stellar’s Guinea Properties 883.2.2 WAD’s Guinea Properties 883.2.3 Stellar’s Sierra Leone Properties 883.2.4 WAD’s Sierra Leone Properties 893.3 Deposit Types & Exploration Methodology 903.3.1 Kimberlite 903.3.2 Alluvial Deposits 923.3.3 Diamond Recovery Methods 924. DESCRIPTION AND LOCATION OF ASSETS 934.1 Guinea Property Descriptions 934.1.1 Stellar’s Mandala Licence 934.1.2 Stellar’s Ouria Licence 934.1.3 Stellar’s Bouro Kimberlite Licences 944.1.4 Stellar’s Droujba kimberlite Licences 9566

4.1.5 WAD’s Bomboko Alluvial Licences 984.1.6 WAD’s Droujba Kimberlite and Alluvial Licence 994.1.7 Guinean Liabilities 1024.2 Sierra Leone Property Descriptions 1024.2.1 Stellar’s Kono Kimberlite Exploration Licences 1024.2.2 Stellar’s Tongo Kimberlite Exploration Licence 1034.2.3 WAD’s former Mining Licence 1/04, Kono District 1044.2.4 WAD’s former EXPL 8/2002 Licence, Kono District 1064.2.5 Liabilities 1075. OVERVIEW OF THE GUINEA DIAMOND PROJECTS 1075.1 Stellar’s Mandala, Ouria and Bouro Properties 1075.1.1 Early History of Guinea Diamond Exploration 1095.1.2 The Exploration by Star Guinée of the Alluvial Diamond Deposits 1105.1.3 Historical Exploration of Mandala Alluvial Deposits 1105.1.4 Historical Exploration of the Ouria Alluvial Exploration Licence 1145.1.5 Historical Exploration of the Bouro Kimberlites 1155.2 WAD’s Bomboko Alluvial Diamond Project 1175.2.1 Historical Exploration of the Bomboko Alluvial Deposit 1185.3 Stellar and WAD’s Droujba Kimberlite & Alluvial diamond Project 1185.3.1 Historical Exploration and Exploitation Results 1206. OVERVIEW OF THE SIERRA LEONE DIAMOND PROJECTS 1216.1 Stellar’s Kono Kimberlite Project 1216.1.1 Historical Exploration and Exploitation Results 1226.2 Stellar’s Tongo Kimberlite Project 1236.3 WAD’s Former Mining Licence ML 1/2004 1256.4 WAD’s Former EXPL 8/2002 – Pipe 3 Project 1257. CURRENT EXPLORATION ON THE GUINEA PROPERTIES 1267.1 Stellar’s Mandala Alluvial Mining Project 1267.2 Stellar’s Ouria Alluvial Mining Project 1347.3 Stellar’s Bouro Kimberlite Dyke Project 1357.4 WAD’s Bomboko Alluvial Diamond Project 1387.5 Stellar and WAD’s Droujba Diamond Project 1408. CURRENT EXPLORATION ON THE SIERRA LEONE PROPERTIES 1498.1 Stellar’s Kono Kimberlite Dyke Project 1498.2 Stellar’s Tongo Kimberlite Dyke Project 16067

8.3 WAD’s Former Sierra Leone ML1/004 – Dump 11 Project 1708.4 WAD’s Former Sierra Leone EXPL8/2002 – Koidu Pipe 3 Project 1719. A NOTE ON THE DIAMOND MARKET 17210. RESOURCE STATEMENT 17410.1 Measured and Indicated Resources 17410.1.1 The Mandala Alluvial Project, Guinea 17410.2 Inferred Resources and Exploration Targets 17610.2.1 The Ouria Alluvial Project 17710.2.2 The Bomboko Alluvial Deposit, Guinea 17710.2.3 The Bouro Kimberlite Dykes, Guinea 17810.2.4 The Droujba Kimberlite and Associated Alluvial Project, Guinea 17910.2.5 The Kono Kimberlite Dyke Project, Sierra Leone 17910.2.6 The Tongo Kimberlite Dyke Project, Sierra Leone 18011. DATA VERIFICATION 18112. CONCLUSIONS AND RECOMMENDATIONS 18212.1 The Mandala Alluvial Diamond Project 18212.2 The Ouria Alluvial Diamond Project 18312.3 The Bouro Kimberlite Dyke Project 18312.4 The Bomboko Alluvial Diamond Project 18312.5 The Droujba Kimberlite & Alluvial Diamond Project 18312.6 The Kono Kimberlite Dyke Project 18412.7 The Tongo Kimberlite Dyke Project 18413. EXPLORATION BUDGET 18514. DATE AND SIGNATURE PAGE 18715. QUALIFIED PERSONS’ CERTIFICATE 18816. REFERENCE & BIBLIOGRAPHY LIST 19117. GLOSSARY OF GEOLOGICAL & MINING TERMS 193LIST OF APPENDICESAPPENDIX A PROPERTY DETAILS 199APPENDIX B MANDALA MINING BLOCKS 201APPENDIX C OTHER ASSETS – SUMMARY LIST 21268

LIST OF MAPSMAP 1: Location of Stellar and WAD Diamond Licences 81MAP 2: Regional Location of Stellar and WAD Diamond Licences 82MAP 3: West African Regional Geology and Location of Licences 86MAP 4: Location of Mandala, Ouria and Bouro Licences 95MAP 5: Location of Stellar’s Droujba Licences 96MAP 6: Location of WAD’s Bomboko Licences 99MAP 7: WAD’s Droujba Licence and the Stellar Droubja Licences 100MAP 8: Location of the Kono Licence 103MAP 9: Location of the Tongo Licence 104MAP 10: WAD’s Sierra Leone Licence and Stellar’s Kono Licences 106MAP 11: Location of the Mandala M I to M V Grid Baselines 110MAP 12: Mandala Project – Star Guinea Grid and Bulk Samples 112MAP 13: Mandala Project – Star N’Kéléyani Grid and Bulk Sample 113MAP 14: Bouro Project – Debsam’s Loam Sampling and Results 115MAP 15: Tongo Project – Stellar Tongo and Adjoining Licences 124MAP 16: Mandala Project – Northern Mining 1 to 287 129MAP 17: Mandala Project – N’Keleyani Mining Blocks 1 to 314 129MAP 18: Mandala Project – Southern Mining Blocks 1 to 307 130MAP 19: Mandala Project – Bulk Sample Cuts Mined to 26 Nov 2009 131MAP 20: Bouro Project – Debsam and Stellar Sampling 137MAP 21: Droujba Project – Results of Stream KIM Survey 141MAP 22: Droujba Project – EM Survey of Block 1 142MAP 23: Droujba Project – Magnetic Survey fo Block 1 143MAP 24: Droujba Project – EM Interpretation Block 2 144MAP 25: Droujba Project – Ground Magnetic Survey Block 2 145MAP 26: Droujba Project – WAD’s Geophysical Results Summary 147MAP 27: Droujba Project – Second Target Area SW of Droujba Pipe 147MAP 28: Droujba Project – Location of Core Holes 148MAP 29: Kono Project – Location of Kono Dykes Mapped to Date 150MAP 30: Kono Project – Summary Results of Stream Sampling 151MAP 31: Kono Project – Location of Loam Sampling Grids 151MAP 32: Kono Project – Location of Rock Samples for KIMs 152MAP 33: Kono Project – Garnet Chemistry from the Lion 1-5 Dykes 15269

MAP 34: Kono Project – Location of Dyke Trenches 153MAP 35: Kono Project – Mini-Bulk Samples and Results 154MAP 36: Kono Project – Dighem Anomalies 155MAP 37: Kono Project – Compilation and Trial Mining Shafts 156MAP 38: Tongo Project – Stream Sediment Sample Results 161MAP 39: Tongo Project – Rock Sample KIM Results 162MAP 40: Tongo Project – Location of Rock Samples for Grade 163MAP 41: Tongo Project – Location of Microdiamond Samples 164MAP 42: Tongo Project – EM Survey Over Known Dykes 165MAP 43: Tongo Project – Location of the Core Drillholes 167LIST OF FIGURESFIGURE 1: Organisation Organogram for Stellar Diamonds 98FIGURE 2: Bouro Project – Total Garnet Chemistry 116FIGURE 3: Tongo Project – Garnet Chemistry 162FIGURE 4: Tongo Project – EM Survey Anomalies 166LIST OF TABLESTABLE 1(a): Measured and Indicated Diamond Resources 74TABLE 1(b): Inferred Diamond Resources 74TABLE 1(c): Speculative Exploration Targets 75TABLE 1(d): Summary 24 Month Budget 80TABLE 2: List of Stellar Guinea Licences 97TABLE 3: List of WAD’s Guinea Licences 101TABLE 4: List of Stellar’s Sierra Leone Licences 105TABLE 5: List of WAD’s Former Sierra Leone Licences 107TABLE 6: Mandala Project – Star Guinée Resource Estimate 111TABLE 7: Mandala Project – Historical Walker Resource Estimate 114TABLE 8: Bouro Project – Debsam Microdiamond Results 117TABLE 9: Tongo Project – Historical Bulk Sampling Results 124TABLE 10: Mandala Project – Reconciliation of Grades, Volumes and Carats Produced 132TABLE 11: Mandala Project – Sales Summary and Inventory 134TABLE 12: Bouro Project – Mini Bulk Sample Locations 13570

TABLE 13: Bouro Project – Stellar’s Mini-Bulk Sampling Results 136TABLE 14: Bomboko Project – Bulk Sampling Results 139TABLE 15: Bomboko Project – Diamond Exported Inventory 139TABLE 16: Droujba Project – Drilling Results Summary 148TABLE 17: Kono Project – Mini-Bulk Sample Results – Lion Dykes 153TABLE 18: Kono Project – Trial Mining Sample Details 156TABLE 19: Kono Project – Trial Mining Production 158TABLE 20: Kono Project – Trial Mining Diamond Values 158TABLE 21: Tongo Project – Dyke Sample Results 163TABLE 22: Tongo Project – Core Drillhole Details 167TABLE 23: Tongo Project – Kimberlite Dyke Pit Details 168TABLE 24: Tongo Project – Bulk Sampling Results 169TABLE 25: Dump 11 Project – Systematic Dump Sampling Results 170TABLE 26: Mandala Project – Measured Resource Estimate 175TABLE 27: Mandala Project – Indicated Resource Estimate 176TABLE 28: Ouria Project – Inferred Resource Estimate 177TABLE 29: Ouria Project – Exploration Target Size Estimate 177TABLE 30: Bomboko Project – Inferred Resource Estimate 178TABLE 31: Bomboko Project – Exploration Target Size Estimate 178TABLE 32: Bouro Project – North Dyke Inferred Resource Estimate 178TABLE 33: Bouro Project – North Dyke Exploration Target Size Estimate 179TABLE 34: Droujba Project – Inferred Resource Estimate 179TABLE 35: Droujba Project – Exploration Target Size Estimate 179TABLE 36: Kono Project – Inferred Resource Estimate 180TABLE 37: Kono Project – Exploration Target Size Estimate 180TABLE 38: Tongo Project – Inferred Resource Estimate 181TABLE 39: Tongo Project – Exploration Target Size Estimate 181TABLE 40: Summary 24 Month Budget 18671

1. Executive Summary1.1 PreambleStellar Diamonds Limited and West African Diamonds plc are diamond exploration companiesand emerging producers with a total of seven active exploration projects located in Guinea andSierra Leone, West Africa. The projects are in various stages of development with one alluvialproject nearing the production stage and another alluvial project at early bulk sampling stage.The two companies wish to merge as this should greatly enhance value for shareholders througha reduction in overheads and the sharing of expertise, skills and equipment. The merged entitythen proposes to raise further capital so as to advance the projects, and with the objective ofhaving at least one commercial mining operation by the end of 2010.Both companies have been operating in West Africa for several years and their managements havegood relationships with government departments at national, regional and local levels. Thecompanies have excellent relationships with the communities close to the projects and apart fromoffering many employment opportunities to local citizens they are substantial contributors to localcommunity affairs and to improving local infrastructure.MPH has assessed the projects and their prospectivity and has estimated mineral resourcesand/or exploration target sizes wherever it has been appropriate to do so and as sufficientinformation exists. All of the projects are deemed by MPH Consulting Limited to have highmerit and should be advanced to the stage where informed decisions as to their potential forcommercial exploitation can be made in our opinion. The combined exploration portfoliooffers the merged company the potential of becoming a mid-tier diamond producer in the shortto medium-term, should the two primary alluvial, and one or more of the high gradekimberlite projects continue to show economic potential.1.2 IntroductionMPH Consulting Limited (“MPH”) has been retained by Stellar Diamonds Limited (“Stellar”),West African Diamonds plc (“WAD”) and their nominated advisors RBC Capital Markets(“RBC”) to complete a Competent Person’s Report on Stellar’s and WAD’s diamond propertieslocated in the Republics of Guinea and Sierra Leone, West Africa. This Report is prepared inaccordance with the June 2009 Note for Mining, Oil and Gas Companies issued by the LondonStock Exchange plc, Alternative Investment Market (AIM).1.3 PropertiesThe reader is referred to Appendix A for all of the licence details.Stellar has a 100 per cent. interest in the following Guinea properties:• The Mandala alluvial diamond project, under a semi-industrial mining licence valid toSeptember 2013.• The Ouria alluvial diamond exploration licence valid to September 2010.• Three Bouro kimberlite diamond exploration licences valid to May 2011, which are subjectto a 2 per cent. net smelter royalty• Two Droujba kimberlite diamond exploration licences valid to June 2011.WAD has a controlling interest in the following Guinea properties:• Two semi-industrial alluvial diamond mining licences on the Bomboko River valid to October2014 and three alluvial diamond exploration licences at Bomboko valid to October 2011.• One Droujba kimberlite exploration licence which is the subject of a compromiseagreement with Stellar.72

Stellar has the following interests in properties in Sierra Leone:• A 49 per cent. interest in two kimberlite diamond exploration licences known as the KonoProject which are valid to 31 January 2011.• A 100 per cent. interest in one kimberlite diamond exploration licence valid to August 2011called the Tongo Project.WAD has the following interests in properties in Sierra Leone:• A 5 per cent. gross royalty interest in a Mining Lease known as the Dump 11 Project. Thelease is valid to March 2012 and a 5 per cent. royalty interest in a gold and diamondprospecting licence EPL 11/2002 which is currently being reduced to three smaller areasand converted to an exploration licence.• A 20 per cent. free carried interest to production in an exploration licence known as thePipe 3 Project. The licence is valid to December 2010.1.4 GeologyAll of the subject Properties lie on the Man Craton of West Africa (Tysdal & Thorman 1983) witha stable, cool cratonic setting favourable for the intrusion of diamondiferous kimberlite andassociated alluvial deposits. Age-provinces within the eastern Man Craton trend NNE-SSW andyoung from west to east. The oldest province is the Leonean (2.95 – 3.2 billion years or “Ga”)succeeded by the Liberian (~2.7 Ga) and the Eburnean (~2.0 Ga). (Skinner et al, 2005).Known kimberlites within the Man Craton are the Banankoro, Bouro and Droujba clusters insoutheast Guinea, the Koidu and Tongo clusters in Sierra Leone, and the Weasua, Kumgbo andMano Godua clusters of western Liberia (Skinner et al, 2005). The Koidu kimberlites in SierraLeone are dated at 146 million years or “Ma” and the Droujba kimberlite in Guinea is dated at153 Ma. Two kimberlites in the Weasua cluster, Liberia, have been dated as Neoproterozoic(~800 Ma) (Skinner et al, 2005), whilst two other clusters in Liberia are undated.1.5 HistoryDiamonds were first recovered in Guinea by Soguinex, a subsidiary company of African SelectionTrust, during the 1930 to 1940 period. They took reconnaissance samples in the lower Diani Riverand recovered a few small diamonds. These results were only followed up by Soguinex in the late1940’s and 1950’s when systematic prospecting took place along the upper Diani valley.(Sutherland, 2007).The first discovery of diamonds in Sierra Leone was made in January 1930 when geologists ofthe Geological Survey found two diamonds in the Gbobora stream at Fotingaia village in theKoidu District while collecting heavy mineral specimens. Consolidated African Selection Trustsent a follow-up expedition to the site in March 1931 and then established Sierra Leone SelectionTrust and began mining at Koidu with a 99-year lease. (P.K.Hall, 1969).Both Guinea and Sierra Leone have attracted many diamond exploration and mining companiesover the intervening years and several commercial mining operations, such as at Koidu in SierraLeone and at Aredor in Guinea have been successful. Artisan miners have operated continuouslyfrom the 1930’s to the present day.1.6 Diamond Exploration to DateStellar and WAD have both primary kimberlite and secondary alluvial diamond projects inGuinea while Stellar has two primary kimberlite projects in Sierra Leone and WAD has residualinterests in two primary kimberlite projects in Sierra Leone.Stellar’s Mandala alluvial diamond project is at the large bulk sampling/trial mining stage andyielding better than predicted results while its adjacent Ouria alluvial project is at a verypreliminary stage of evaluation.73

WAD’s Bomboko alluvial project is at an early bulk sampling stage but requires collation ofhistorical and early phase sampling data followed by further systematic drilling and pitting toestimate the grade and extent of the deposit.All of the Stellar and WAD kimberlite projects are at an advanced stage, where kimberlite dykesand small pipes have been located and exploration of the occurrences is now at the evaluationstage. Further drilling to define continuity, bulk sampling and trial mining preparatory tofeasibility studies are underway or planned.The Companies’ more marginal projects, such as WAD’s two Sierra Leone projects have beenfarmed out to third parties while retaining participation rights.1.7 Resource StatementThe estimated diamond resources of Stellar and WAD are summarized in the following Tables.Table 1(a): Measured and Indicated Diamond ResourcesLower Gravel DiamondResource Screen Volume Grade Resource Value 1Class Project Attributable % Operator Size (m 3 ) Cts/m 3 (cts) US$/ctMeasured Mandala 100% Stellar RMG 1.7mm 213,000 0.6914 147,000 30.73Indicated Mandala 100% Stellar RMG 1.0mm 1,419,000 0.373 529,000 30.73Total Measured & Indicated 1,632,000 676,000Table 1(b): Inferred Diamond ResourcesLower Min. DiamondResource Screen Minimum Grade Resource ValueClass Project Attributable % Operator Size Tonnes cpht (cts) US$/ctInferred Ouria 100% Stellar RMG 1.0mm 300,000 38.09 114,000 30.73 2Inferred Bouro N. 100% Stellar MRDG 1.0mm 108,000 182.5 196,000 30.73 2Inferred Bomboko 100% WAD WAD 2.5mm 1,000,000 4.06 41,000 121.59 3Inferred Droujba In dispute In dispute 0.5mm 200,000 80.08 160,000 unknownInferred Kono- 100% Basama 0.8mm 53,000 37.31 20,000 84.91 4Pol-K 49% Stellar Diamonds 26,000* 10,000*Inferred Kono- 100% Basama 0.8mm 53,000 27.90 14,000 51.84 4Bardu 49% Stellar Diamonds 26,000* 7,000*Inferred Tongo 100% Stellar Sierra 0.8mm 27,000 89.79 24,000 100.00 5Dyke 1Diamonds(SL) LtdInferred Tongo 100% Stellar Sierra 0.8mm 27,000 99.79 27,000 100.00 5Dyke 4Diamonds(SL) LtdTotal Inferred & Attributed 1,714,000 579,000* This is the attributed 49 per cent. of the total resource RMG: Ressources Mandala Guinée SARL & MRDG: Mano RiverDiamant Guinée SARL1. This value is derived from actual sales by Stellar’s marketing agents in Antwerp & Dubai over the period June to October 2009.2. This is the sales value of a 670.44ct parcel of diamonds sold by tender on 3 December 2009.3. These estimated values are based on the assumption that because the projects are geographically very close to Mandala, theirdiamonds should be of similar value.4. These values are based on the weighted average sale price of Kono diamonds from sales in September 2008, March, April andJune 2009.5. The Dyke 1 & 4 bulk sampling parcel of 183.4cts was valued by the government valuer for export in November 2008 at anaverage of US$189/ct; The same parcel was valued by Stellar’s sales agent in Antwerp in November 2008 at US$124/ct, howeveron sale in May 2009, the parcel only fetched a price of US$61/ct. It is Stellar’s opinion that a December 2009, conservativevalue of US$150/ct could be applied to the Dyke 1 & US$50/ct could be applied to the Dyke 4 production based on the currentprice trend as illustrated in the first graph in section 9.74

Table 1(c): Speculative Exploration TargetsMin – Max Size Range Estimated Grade Speculative TargetLower Screen (Tonnes) (cpht) Size (cts) SpeculativeProject Attributable (%) Operator Size (mm) From To From To From To Value (US$/ct)Bomboko 100% WAD 2.5 1 million 7 million 4.06 9.75 41,000 683,000 121.59 2Droujba 100% WAD/Stellar 0.5 200,000 400,000 80.08 160,000 320,000 unknownBouro 100% (2% royalty) Stellar 1.0 108,000 13.45 mill. 148.52 182.5 196,000 20 mill. 30.73 3Ouria 100% Stellar 1.0 300,000 360,000 38.09 114,000 137,000 30.73 3Kono Pol-K 49% Basama 0.8 26,000 2.45 mill. 37.31 10,000 448,000 84.91 4Kono Bardu 26,000 2.45 mill. 27.90 7,000 335,000 51.84 4Tongo Dyke 1 100% Stellar 0.8 27,000 2 million 89.79 24,000 1.8 mill. 150.00 5Tongo Dyke 4 27,000 861,000 99.79 27,000 859,000 50.00 52. This is the sales value of a 670.44ct parcel of diamonds sold by tender on 3 December 2009.3. These estimated values are based on the assumption that because the projects are geographically very close to Mandala, their diamonds should be of similar value.4. These values are based on the weighted average sale price of Kono diamonds from sales in September 2008, March, April and June 2009.5. The Dyke 1 & 4 bulk sampling parcel of 183.4cts was valued by the government valuer for export in November 2008 at an average of US$189/ct; The same parcel was valued by Stellar’s sales agent in Antwerpin November 2008 at US$124/ct, however on sale in May 2009, the parcel only fetched a price of US$61/ct. It is Stellar’s opinion that a December 2009, conservative value of US$150/ct could be applied tothe Dyke 1 & US$50/ct could be applied to the Dyke 4 production based on the current price trend as illustrated in the first graph in section 9.75

1.8 Conclusions and Recommendations for Further WorkStellar has in the Mandala alluvial diamond project, an advanced exploration project which, becauseof the better than expected grade, could easily be upgraded to a full commercial mining operationby acquiring additional mining capacity in the form of excavators and ADT’s. The recovery in roughdiamond prices to the early 2008 levels will certainly justify this additional capital expenditure.WAD’s Bomboko alluvial diamond project requires better definition of the extent and grade of theore body gravels before execution of a mining block plan and continued bulk sampling. Thetransfer of skills, knowledge and experience in alluvial mining in Guinea between Stellar and WADwill also advance this project towards a full commercial mining operation. In our opinion, both theMandala and Bomboko projects could be in full commercial mining production within a year andprovide a desirable assortment of rough diamonds.Stellar’s Ouria alluvial project is located some 3km from the current Mandala treatment plant site.Evaluation of the Ouria deposit requires systematic pitting or drilling to define the extent andgrade of the gravel resource. Since it is so close to the treatment plant, the Ouria resource couldadd another one or two years of life to the overall Mandala project.Similarly, Stellar’s Bouro North kimberlite dyke project is located close to the Mandala treatmentplant and the rapid advancement of this project over the next two years would add value to theentire operation at Mandala. The exploration results to date indicate that the Bouro North dyke ishigh grade; work now must define the lateral and vertical extent of the dyke and provideconfirmation of the grade by taking a larger bulk sample. These steps are needed prior to adecision on mine development.The Droujba kimberlite pipe requires much more exploration before any definitive statements canbe made about its tonnage potential, extent and grade and diamond value. The other kimberlitedykes and the alluvial deposits within the greater Droujba region also have potential and requireexploration and evaluation.The Kono and Tongo kimberlite dyke projects are at an advanced stage where the location ofthe better grade and sized dykes are known. Trial mining needs to be completed at both projectsto test their run-of-mine grades and determine the feasibility of commercial operations.The Mandala Alluvial Diamond ProjectAfter six months of bulk sampling, the average recovered grade of the southern blocks is better,by a factor of 1.98, than predicted by the block mining model (Table 11, on page 133 below); theincrease in the actual recovered grade may be the result of several factors, the most important ofwhich is mining grade control – essentially, good management of dilution in the bulk sample pit.Other important factors are better recovery due to an efficient plant and better security – theStellar DMS treatment plant is far more efficient and secure than the jig plants used by previousoperators Star Guinea and SearchGold.Diamond sales between 29 June and 31 October 2009 totaled 33,502cts with gross receipts ofUS$1,029,514, which means an average price of US$30.73/ct was received. The diamonds aresold by independent agents in Antwerp, through Natural Diamond Corporation, and in Dubaithrough Global Diamond Tenders.Please note that sales are of run-of-mine diamonds and fairly reflect the average value ofproduction in the current weak diamond market (run of mine sales in 2004/5 were $53/ct). Goingforward the diamond market is expected to improve as the world comes out of recession and salesof luxury goods increase (Allan, 2009. Wyndham, 2009), this will impact positively on the pricesof rough diamonds. See remarks in section 9 regarding the diamond market.It is recommended that Stellar purchase at least one additional 20-tonne articulated dump truck(“ADT”) and then continue the bulk sampling program, especially in the Northern andN’Keleyani River mining blocks to more accurately determine further Measured Resourcesbefore proceeding to a feasibility study. A second set of excavators and ADT’s to open anadditional mining area will be required to upgrade this project to full commercial mining status.76

The Ouria Alluvial Diamond ProjectIt is recommended that a base line and grid be established and that mapping of the current artisanactivity be initiated before planning for a drill and pit sampling campaign to establish the extentof the alluvial deposits and their possible grade.The Bouro Kimberlite Dyke ProjectFrom work completed to date, particularly the high grade estimate for the Bouro North Dyke, itcan be concluded that larger scale bulk sampling followed by underground trial mining of theBouro North kimberlite dyke is justified and should be pursued as a high priority.The Bomboko Alluvial Diamond ProjectA global deposit grade of 4.06cpht is indicated from the bulk sampling and treatment to date;from historical results and personal observation it is our opinion that this grade is seriouslyundervaluing the deposit because of:(a)(b)(c)Over-mining, with too much dilution from both overburden and bedrock,Over-estimation of tonnes processed,The bottom screen size at 2.5mm is too large to capture the smaller stones.The quality and high average stone size of diamonds produced to date (US$121.59/ct and0.549 cts/st. respectively) is very encouraging with a gem to non-gem ratio of 53:47.Sampling results obtained from the previous operator, AA Mining, needs to be combined with theWAD data to produce a comprehensive map of gravel location and grade distribution within thelicence area. Following the production of such a set of maps, an improved resource estimate canbe made and mining blocks and a mine plan can be created to guide bulk sampling.The single dump truck is insufficient in our opinion to deliver adequate tonnage of gravels to theplant. The acquisition of one or more ADT’s is essential to the efficient bulk sampling operation,particularly as stockpiles of gravel are required at the plant site to process through the wet seasonwhen mining becomes problematic.The present plant site is too far from the mining area in our opinion, adding not only to transportcosts but also to delivery time and truck utilization. A short-term solution is to mine cuts closerto the plant. In the longer term, the plant should be moved to a central location on the river flat.The trucks should be loaded directly from the bulk sample pit by the excavator, avoiding doublehandling at the pit site and saving the additional cost of a front-end loader (“FEL”).The Droujba Kimberlite & Alluvial Diamond ProjectExploration of the region has not found all of the probable dykes or pipes in the field. Furtherfollow-up by means of stream and loam kimberlite indicator mineral (“KIM”) sampling isrecommended.Field mapping of the alluvial diamond flats and terraces and artisan workings is required toaccurately assess the potential alluvial areas that remain to be explored.The geophysical survey results indicate that the Droujba pipe (blow) may be displaced to thesouth-west; therefore a series of inclined coreholes, capable of drill depths of 400m, need to beimplemented to evaluate the depth extent of this kimberlite and, by means of micro-diamondanalysis model the potential macro-diamond grade. Subject to satisfactory drilling andmicrodiamond results it is also recommended that a surface bulk sample be collected andprocessed to determine the macrodiamond grade and value of the pipe.Trenching and pitting of the known dykes in the area should proceed to determine their (a) KIMmineral chemistry leading to an assessment of diamond carrying capacity and (b) Mini-bulksampling for micro-diamond analysis to determine a range of potential macro-diamond grades.77

The Kono Kimberlite Dyke ProjectThe licence area has been thoroughly explored by stream, loam and rock sampling, by mappingof artisan activity and by airborne EM and there is a very low probability that further kimberlitedykes or pipes could still be discovered.The mineral chemistry results of dyke samples indicate that Lion Dykes 3 & 5 have the bestdiamond potential. The mini-bulk sampling indicates that Lion Dyke 5 (94 cpht) and the easternportion of Lion Dyke 1 (66 cpht) have the best indications of commercial potential of the dykessampled to date.The trial mining of Lion Dykes 5 (Bardu shaft) and 7 (Pol-K shaft) have shown that their fullydiluted, run-of-mine grades range between 28 and 38 cpht, that the average stone size is likely tobe 0.08 cts./stone. Note that the plant bottom screen size was 0.8mm, allowing the recovery ofstones weighing >0.0087cts. and this accounts for the large number of small stones and thereforethe very low average stone size. An increase in the bottom screen size to 1.5mm will lower thegrade but increase the average diamond size and US$/ct value.From the relatively small amount of test mining, with 3,177.8cts valued at US$84.91 produced atthe Pol-K shaft and 855.6cts valued at US$51.84/ct produced from the Bardu shaft, it does notappear that either of these two selected, better grade dykes are commercially viable under currentmarket conditions. This is why the project was placed on temporary care and maintenance by thepartners; however, it is recommended that further test mining and evaluation of these shafts isrequired as diamond prices improve before making a final decision as to their commercialpotential. This should only be done once the recommended plant upgrade as to weightometers,bottom screen sizes and final recovery process have been installed.The principal author has been informed that in the Bardu shaft on the 45m level and 100m SWof the shaft, the dyke swells to a thickness of 3m and is believed to be a different kimberliteintrusive phase, with a grade of 140 cpht and an average diamond value of US$87.50 per carat inJune 2009. The extent, both vertically and laterally of this different kimberlite is unknown and ittherefore requires further definition and evaluation.The above diamond values are derived from actual sales by Stellar’s independent agents inAntwerp, through Natural Diamond Corporation, and in Dubai through Global Diamond Tenders.It is recommended that trial mining of Lion Dykes 1 (east) and Lion Dykes 7 (N.E. extension) andpossibly Lion Dyke 2 (N) be initiated to fully test their potential.The diamond recovery plant gives some cause for concern. There are no weightometers on theplant feed belts or on the waste picking belts and tonnes fed to the plant are estimated fromFEL loads. This has a serious effect on the calculation of grade, since an over-estimate of thetonnes treated results in an under-estimate of the grade. (I. Jones, 2009).The security and efficiency of the plant and particularly the final recovery section should besignificantly upgraded. (I. Jones, op cit).The Tongo Kimberlite Dyke ProjectThe licence area has been thoroughly explored by stream, loam and rock sampling, by mappingof artisan activity and by ground EM and there is a very low probability that further kimberlitedykes or pipes could still be discovered by further exploration.Dykes 1 & 4 have the best potential for producing commercial diamond grades of the order of100 cpht. with a high probability of producing occasional very large diamonds (Oosterveld, 2009).The Dyke 1 & 4 bulk sampling parcel of 183.4cts was valued by the government valuer for exportin November 2008 at an average of US$189/ct; The same parcel was valued by Stellar’s salesagent in Antwerp in November 2008 at US$124/ct, however on sale in May 2009, the parcel onlyfetched a price of US$61/ct. It is Stellar’s opinion that a current, conservative average value of78

US$100/ct could be applied to the Tongo production (Dykes 1 & 4 being valued by Stellar atUS$150/ct & US$50/ct respectively) based on the current price trend as illustrated in thefirst graph in section 9.All of the diamonds recovered in the bulk sampling were classed as gem quality.It is recommended that trial mining of Dykes 1 & 4 be initiated to further test their meritpreparatory to a decision as to the commercial potential of mining these dykes.1.9 Budgeted Exploration ExpenditureThe Stellar and WAD management have prepared an exploration and evaluation program with abudget estimate of project expenditure for the 24-month period from December 2009 toDecember 2011. The detailed budgets are summarized below in Table 1d. Stellar/WAD haveforecast capital and operating expenditures of ~US$ 19.5 million, with the vast majority of thosecosts associated with the Mandala (US$6.7 million), Tongo (US$5.8 million) and BombokoProjects (US$4.7 million)The work program, timing and cost estimates for each project are summarised as follows:Mandala Alluvial Project: Over the 24-month period from January 2010 to December 2011,continue bulk sampling after acquiring additional mining equipment, which is expected bymanagement to produce some 280,000cts from 329,000m 3 of gravel. Should these productionexpectations be met, and the diamonds can continue to be sold at US$32/ct. (or better), thenmanagement believes they will break-even or produce a small net profit over the period afterdeduction of the capital expenditure.Bomboko Alluvial Project: Over a 24-month period to December 2011, continue the bulksampling program in March 2010, after upgrading equipment. Management is targeting toexcavate and treat 1,322,000 tonnes of gravel to produce 92,500cts of diamond, which requiressubstantial improvement on presently recovered grades of 4.06cpht to 7cpht. There are somecompelling reasons to believe that this 75 per cent. grade improvement may be attainable in ouropinion, as discussed earlier. Should the diamonds continue to be sold for an average price ofUS$130/ct, this project could generate a substantial profit of several million dollars.Tongo Kimberlite Project: Begin 1,000m of core drilling in March 2010 to define depth andlateral continuity of Dyke 1. After spending ~US$2 million in capital expenditure, begin to trialmine in January 2011 by sinking a single shaft on Dyke 1 to produce 25,000 tonnes of kimberliteby December 2011. Transport and treat this sample through the Kono plant, where based oncurrent estimates of grade of ~89cpht, it should produce 22,500cts, although managementbelieves that a grade of 150cpht and 38,500cts is attainable. Management believes that the parcelshould fetch US$150/ct by Q4 2011 or Q1 2012. If all goes as per this optimistic scenario, andthe 38,500ct parcel is indeed sold at the predicted price, then the net cost of this program couldbe as low as ~US$1 million from the overall budget of US$5.8 million.Droujba Kimberlite Project: Between October 2010 and April 2011, carry out 3,000m of coredrilling to define the lateral and depth extent of the kimberlite pipe. Between November 2010 andJune 2011, de-water the flooded excavation and take a 1,000 tonne bulk sample and treat thisthrough the mobile 5tph DMS plant that is already on site. The parcel of diamonds produced fromthe bulk sampling will be valued and retained. The total cost of the program is estimated tobe ~US$1.6 million.Ouria Alluvial Project: Management intends to make as much use of the nearby Mandalainfrastructure and equipment as possible on this project, and similarly with Bouro. The programfirst calls for the systematic collection and hand-jigging of small samples on a grid.79

Table 1(d): Summary 24 Month Budget (All numbers are in US$000’s)2010 2011Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY 24 Month TotalMandala Alluvial ProjectCapex – $000s 625.0 62.0 0.0 0.0 687.0 0.0 0.0 0.0 0.0 0.0Opex – $000s 860.5 799.2 609.1 767.1 3035.9 816.7 750.0 612.9 813.6 2993.1–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 1485.5 861.2 609.1 767.1 3722.9 816.7 750.0 612.9 813.6 2993.1 6,715.96–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Ouria Alluvial ProjectCapex – $000s 19.1 10.1 29.2 0.0Opex – $000s 156.2 156.2 0.0–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 19.1 166.3 0.0 0.0 185.4 0.0 0.0 0.0 0.0 0.0 185.43–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Bomboko Alluvial ProjectCapex – $000s 805.5 34.0 5.0 0.0 844.5 0.0 0.0 0.0 0.0 0.0Opex – $000s 456.7 549.5 394.9 499.9 1901.0 537.5 537.5 400.9 501.9 1977.8–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 1262.2 583.5 399.9 499.9 2745.5 537.5 537.5 400.9 501.9 1977.8 4,723.31–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Bomboko/Mandala roadCapex – $000s 168.5 168.5 0.0–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 168.5 0.0 0.0 0.0 168.5 0.0 0.0 0.0 0.0 0.0 68.49–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––––Alluvial Totals $000s 2,935.31 1,610.99 1,008.96 1,266.98 6,822.24 1,354.19 1,287.52 1,013.76 1,315.48 4,970.95 11,793.19–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––––Bouro Kimberlite ProjectCapex/Opex – $000s 8.9 88.1 4 0 101 5 0 0 0 5–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 8.9 88.1 4.0 0.0 101.0 5.0 0.0 0.0 0.0 5.0 106.00–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Droujba Kimberlite ProjectCapex/Opex – $000s 6.5 1.5 226.8 597.3 832.1 605.8 163.3 0 0 769.1–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 6.5 1.5 226.8 597.3 832.1 605.8 163.3 0.0 0.0 769.1 1,601.20–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Tongo Kimberlite ProjectCapex – $000s 621.7 1,350.3 3.0 3.0 1978.0 13.0 3.0 3.0 3.0 22.0Opex – $000s 112.7 538.9 276.9 451.9 1,380.3 575.0 682.0 510.5 646.4 2,413.9–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Totals 734.3 1889.2 279.9 454.9 3358.3 588.0 685.0 513.5 649.4 2435.9 5,794.25–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Kono Kimberlite ProjectTotal c&m costs pm 80.7 17.2 17.2 17.2 132.4 50.4 17.2 17.2 17.2 102.0 234.40–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––––Kimberlite Totals $000s 830.49 1,996.00 527.89 1,069.44 4,423.83 1,249.17 865.49 530.71 666.65 3,312.03 7,735.85–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––––80

Between March and June 2010, select a bulk sample site for the excavation of 10,000m 3 of gravelfor transport and treatment through the Mandala plant. Based on present knowledge of gradesmanagement expects to produce ~8,000cts by targeting a high-grade area of the deposit. Shouldthe parcels be sold, and attain similar values as Mandala, then the project could break-even.Bouro Kimberlite Project: Between March and June 2010, excavate a 1,000 tonne mini-bulksample from the Bouro North Dyke and treat it through the Mandala plant to obtain more credibledata on both grade and value. The estimated cost of this sampling is US$106,000.Kono Kimberlite Project: The project is presently forecast to remain on care and maintenance toDecember 2011 at a cost of US$234,000, unless there are substantial improvements in thediamond market which could provide impetus to restart the trial mining.Other: Improve the 71km gravel road between Mandala and Bomboko projects in February andMarch 2010 at a cost of US$169,000.Although the improvements and therefore grade and revenue expections of management at theBomboko operation are deemed optimistic by MPH, as are management’s expectations for Tongo,we do feel that these programs will achieve all of the technical exploration and evaluationobjectives recommended in this report. MPH therefore endorses the planned further explorationof the projects as budgeted by the Stellar and WAD management, with the proviso that theavailability of additional funding would eliminate a substantial amount of the operational risks.In particular it would be preferable for the Company not to sell parcels from bulk samplingprograms as they’ll be needed should further technical and bankable studies be planned.Map 1: Location of Stellar and WAD Diamond Licences81

Map 2: Regional Location of Stellar and WAD Diamond Licences2. Introduction and Terms of ReferenceOn the instructions of Mr N K Smithson, Chief Executive Officer of Stellar Diamonds Limited ofNerine House St. Peter Port, Guernsey, United Kingdom GY1 3ZG (“Stellar”), MPH Consulting Limited(“MPH”) has prepared an Independent Competent Person’s Report compliant with the June 2009 Note forMining, Oil and Gas Companies issued by the London Stock Exchange plc, Alternative Investment Market(AIM). This report describes the exploration assets and liabilities of Stellar and West African Diamondsplc (“WAD”). The effective date of this report is 23 December 2009.Stellar Diamonds is a Guernsey-incorporated diamond exploration company which has a portfolio ofdevelopment and exploration properties in the West African republics of Sierra Leone and Guinea. Thecompany acquired its initial assets by entering into a share purchase agreement with Mano RiverResources Inc. (“Mano”) in 2007.West African Diamonds of 20-22 Bedford Row, London WC1R 4JS, United Kingdom was listed on theAIM market in 2007 and is a diamond mining and exploration company with a portfolio of developmentand exploration properties in the West African republics of Sierra Leone and Guinea. The companyacquired its initial assets by entering into a share purchase agreement with AIM listed companyAfrican Diamonds plc (“AFD”).Stellar and WAD have agreed on the terms of a merger and are required to seek the approval of theirshareholders and the re-admission of the enlarged group. The companies also wish to raise additionalcapital by means of a share issue in order to advance their plans for exploration and development oftheir joint West African diamond assets. In view of these intentions, this report is also addressed to theenlarged group’s nominated advisor, RBC Capital Markets.2.1 Principal Sources of InformationIn preparing this Report, the authors reviewed both internal confidential technical reports andother sources of data and information as provided by Stellar and WAD, and obtained independentinformation from the public domain as listed in the Reference and Bibliography section of thisReport. In addition, the principal author, Mr. Peter Walker completed site visits and interviewswith key personnel, as well as drawing on his own experience in primary and alluvial diamondexploration and mining, as well as knowledge gained from two previous visits to Stellar’sMandala, Ouria and Bouro properties.82

This Report is based on a review of the available data in several Competent Person and otherreports as listed below, the author’s first visit to the Mandala & Ouria properties in July 2004 anda second visit which included the Bouro properties in July 2007 as well as the current visit inNovember 2009 to all of the properties as more fully described below, and various discussionswith company officers and directors. The sources of other data and information used in thecompilation of this Report are listed in the References and Bibliography section of this Report.The following documents, prepared by Independent parties are of particular importance inconnection with this Competent Person’s Report:Diatchenko V. et al., 1961-1962, Russian Geological Mission in the Republic of Guinea. Report onthe research activities and prospecting work conducted on gold, diamonds & limestone with thetechnical assistance of Russian geologists. (translated from the Russian).Elford K. & Acheson D., December 2006: Competent Person’s Report on the Mineral Assets inGuinea, Soumbaya and Fangamadou Areas for West African Diamonds plc, Corporate Synergyplc and Deloitte and Touche. Behr Dolbear International Ltd.Elford K. & Acheson D., August 2008: West African Diamonds plc – The Mineral Assets inGuinea and Sierra Leone. Behr Dolbear International Ltd.Mano River Diamants Guinée SARL 2005. Annual Report for 2005 on Prospecting Operationsof Decrees 2005/1767, 1768 and 769, Kérouané Préfecture, Guinea.Mano River Diamants Guinée SARL 2006. Six Monthly Reports on the Prospecting Operations ofDecrees 2005/1767, 1768 and 1769, Kérouané Préfecture, Guinea, Period 1 January – 30 June 2006.NKS Consulting 2003a 1 . Report on the Bourou Kimberlite Project of De Beers. Report NKS149.NKS Consulting 2004 1 . Final Report on the Due Diligence of the Bourou Kimberlites in SouthEast Guinea. Report NKS153.Oosterveld M.M. September 2007. Report on Micro Diamonds recovered from Dykes in theTongo Licence Area, Sierra Leone.Oosterveld M.M. 9 June 2009. Tongo Kimberlite Dykes, Sierra Leone – Dyke 1 & 4: Analysis ofSize Frequency and Valuation Results.Sobie P. & McGeorge I., 28 September 2008: NI 43-101 Technical Report prepared on DiamondExploration Properties in Liberia and Sierra Leone for Stellar Diamonds Limited, PanmureGordon (UK) Ltd and GMP Securities Europe LLP. MPH Consulting Ltd.Sutherland, D.G. 2004. Report, for SouthernEra Diamonds Inc., on SearchGold Resources’Mandala Project, Guinea.Sutherland, D.G.: Placer Analysis Ltd 1989. Mandala – N’Kéléyani. Évaluations des Alluvions.(2 volumes). (Report for Star Guinée).Sutherland, D.G.: Placer Analysis Ltd May 2007. Report for West African Diamonds plc, on theDiamond Deposits in and around Bounoudou, SE Guinea.Villeneuve, D. 2000. Les gîtes de diamants alluvionnaires Mandala et N’Kéléyani, Républiquede Guinée, Afrique de l’Ouest. (report for Ressources SearchGold Inc. by RDV Inc.,Laval, Québec).Walker, P.W.A. 2004. Preliminary feasibility study report on the Mandala and Ouria RiverAlluvial Diamond Projects of SearchGold Resources Inc., Guinea, West Africa.1. At the time of writing these reports, N.K. Smithson of NKS Consulting was an independent consultant to Mano River Diamondsand was subsequently employed permanently as the Vice-President Exploration of Mano River Resources plc and thenChief Executive Officer of Stellar Diamonds Limited.83

Walker P.W.A. & Sobie P., 28 September 2008. National Instrument 43-101 Technical ReportPrepared on the Diamond Mining & Exploration Properties in Guinea, West Africa for StellarDiamonds Limited, Panmure Gordon (UK) Limited and GMP Securities Europe LLP. MPHConsulting Limited.Walker P.W.A. & Martinez I., 1 October 2008. Independent Technical Review of the AlluvialDiamond Mining Blocks, Mandala River Project, Guinea, West Africa. VP3 Geoservices, Cape Town.MPH understands that this Report may be used by Stellar and WAD or their merged entity forsecurities regulatory filings and for exploration and development fundraising purposes on theAlternative Investment Market exchange (“AIM”), a subsidiary of the London Stock Exchangeplc. This Report describes their assets and liabilities, their properties’ technical and economicpotential and recommends a comprehensive exploration program. As such, it meets or exceeds thestandards set by the London Stock Exchange’s AIM as detailed in their June 2009 “Note forMining, Oil and Gas Companies”.2.2 Site VisitsThe subject diamond properties were visited by the principal author during the period October 30to November 12 2009, in the company of the Stellar Chief Operating Officer, Mr Rowan Carr.In Sierra Leone interviews were held with the Senior Project Geologist, Mr. A.K. Mansaray andwith project geologist, Mr.S.Swaray.In Guinea interviews and discussion with the Mandala alluvial project manager, Mr. G. Radburndand the metallurgical manager, Mr. C. Coetzee; at Bomboko the project managerMr. R. Liebenberg and at Droujba with prospector, Mr. Bamba Sheriff.The CEO of Stellar, Mr. Karl Smithson, the CEO of WAD, Mr. James Campbell and the COO ofWAD, Mr.Hennie Wessels arranged the tour and provided all of the supporting reports, maps anddocuments and addressed all queries and comments.On the 31 October and 1 November 2009 the Kono licence areas were inspected and work to dateplus future exploration and exploitation plans were discussed. On the 2 November 2009 the Tongolicence area was inspected and work programs were reviewed.Between 5 and 6 November 2009, the Mandala flats and terraces, particularly the bulk samplingoperation and the new treatment plant were inspected; discussions focussed on the bulk samplingdone subsequent to the author’s previous visit in 2007.On the 7 and 8 November 2009 the Bomboko project was visited and both the bulk sampling pitsand the plant were examined and progress was discussed with project personnel.On the 10 November 2009 the Droujba alluvial and kimberlite licence areas were visited and theprogress of both Stellar’s and WAD’s exploration there was reviewed.2.3 Qualifications and Independence of MPH and the AuthorsMPH is an international geological consulting company incorporated in the Province of Ontario,Canada in 1967. MPH provides a wide range of geological, geophysical, and exploration projectmanagement services to the international mining industry, including evaluation, pre-feasibilityand feasibility studies on mineral properties. The Company’s services are provided from officeslocated in Toronto, Canada. Neither MPH nor the authors are insiders, associates or affiliates ofStellar or WAD and none of the directors, shareholders, or employees of MPH owns, directly orindirectly, any shares in Stellar or WAD, their parent or subsidiary and associated companies.This report has been prepared principally by Mr. Peter Walker B.Sc. (Hons.) Geol, MBA,Pr.Sci.Nat., consulting geologist with input from Mr. Paul Sobie, P.Geo, President of MPH.Mr. Walker has over 30 years of experience in the mining industry with extensive experience indiamonds, gold, uranium, base and industrial mineral exploration and mining projects including3 years of kimberlite diamond exploration management and some 13 years of alluvial diamond84

exploration management and consulting on diamond projects in South Africa, Namibia, Angola,Gabon, Guinea, Democratic Republic of Congo, Liberia, Central African Republic, Zimbabwe,Mozambique, Botswana, Brazil, Venezuela, Indonesia, and Australia.Mr. Sobie has over 20 years of experience in the mining industry that also includes extensiveexperience in the evaluation of diamond exploration and mining projects throughout the world.The principals involved in the preparation of this report have a demonstrated track record ofundertaking technical assessments of resource and reserve statements, project evaluations andaudits, technical reports and independent feasibility evaluations to bankable standards on behalfof exploration and mining companies and financial institutions worldwide. More importantlyboth of the authors have experience relevant to the deposit types reviewed in this report.For the purpose of this report Mr. Walker is principal author and Qualified Person, and Mr. Sobie,co-author.Neither MPH nor the authors of this Report, their family members or associates, have anybusiness relationship, other than acting as an independent consultant, with Stellar or WAD norany associated company or company mentioned in this Report, which is likely to materiallyinfluence their impartiality or create the perception that the credibility of the report could becompromised or biased in any way. The views expressed herein are genuinely held and deemedindependent of Stellar and WAD.Neither MPH nor the authors of this Report, their family members or associates, have anyfinancial interest in the outcome of any transaction involving the properties considered in thisReport, other than the payment of normal professional fees for the work undertaken in preparationof the Report which are based on a daily charge-out rate and reimbursement of expenses. Thepayment of such fees is not dependant upon the content or the conclusions of either this Report,or any consequences of any proposed transaction.Stellar, WAD and RBC have accepted that the qualifications, expertise, experience, competence,membership of appropriate professional bodies and professional reputation of MPH and theauthors are appropriate and relevant for the preparation of this Report.2.4 Disclaimer & Reliance on Other ExpertsExploration and previous trial mining data was made available to the authors by Petra DiamondsLtd., SearchGold Resources, Stellar and WAD and is cited in this Report. Duplicates or portionsof the original drill and bulk samples collected and processed to obtain this data are not availablefor check analysis and since the Principal Author was only present for short periods in 2004, 2007and during the current 2009 visits when bulk sampling was in progress, he cannot vouch for theintegrity of any of the data available, however, the Principal Author is able to confirm consistencywith the reports of the historical work.The authors have assumed that all of the information and technical documents reviewed and listedin the References and Bibliography section of this Report are accurate and complete in allmaterial aspects. While due care has been taken in the use of this information, the authors havenot conducted any extensive independent investigation to verify their source data for accuracyand completeness.The principal author has had sight of copies of the original documents granting the mining andexploration rights and is able to verify their existence and accepts Stellar and WAD’s assurancesthat they are in good standing, however, the authors are not qualified to report on their legal status.The information and conclusions contained in this Report are based on data and informationavailable to MPH and the authors at the time of preparation of this Report and are subject to theassumptions, conditions and qualifications set forth in this Report.Stellar and WAD have warranted that a full disclosure of all material information in itspossession or control has been made to MPH and the authors. Stellar and WAD have agreed thatneither it nor its associates will make any claim against MPH or the authors to recover any loss85

or damages suffered as a result of MPH and the authors’ reliance on information provided byStellar and WAD for use in the preparation of this Report. Stellar and WAD have alsoindemnified MPH and the authors against any claim arising out of the assignment to prepare thisReport, except where the claim arises as a result of any proven, wilful misconduct or negligenceon the part of MPH or the authors. This indemnity is also applied to any consequential extensionof work through queries, questions, public hearings, or additional work required from MPH’sperformance of the engagement.Stellar and WAD have reviewed draft copies of the Report for factual errors. Any changes madeas a result of these reviews did not involve any alteration to the conclusions made; hence, thestatements and opinions expressed in this Report are given in good faith and in the belief that suchstatements and opinions are not false and misleading at the date of the Report.MPH reserves the right, but is not obligated to revise this Report and conclusions therein ifadditional information becomes known to MPH subsequent to the date of this Report.2.5 No Material ChangeMPH is not aware of any material change with respect to the subject matter of this report that isnot reflected in the report, the omission to disclose which would make the report misleading.3. Regional Geology, Resources & Exploration Methodology3.1 Regional GeologyAll of the subject Properties lie on the Man Craton of West Africa (Tysdal & Thorman, 1983) witha stable, cool cratonic setting favourable for the intrusion of diamondiferous kimberlite andassociated alluvial deposits. Age-provinces within the eastern Man Craton trend NNE-SSW andyoung from west to east. The oldest province is the Leonean (2.95 – 3.2 billion years or “Ga”)succeeded by the Liberian (~2.7 Ga) and the Eburnean (~2.0 Ga). The Mandala area is underlainby granite, biotite-hornblende granitic gneisses and amphibolites of Liberian age. These rocks arecut by a system of dolerite dykes with a dominant east – west orientation. The dolerite dykes, andfurther north, associated sills, were generally considered to be of Triassic age, but may besomewhat older, probably Devonian. Kimberlite dykes cut the dolerites and have been dated at140 – 150 million years (“Ma”) (Skinner et al, 2005).In the south of the Mandala Basin, the bedrock shows a strong southwest – northeast structuralgrain, whilst to the north the structure is more complex.Map 3: West African Regional Geology and Location of Licences86

Known kimberlites within the Man Craton are the Banankoro, Bouro and Droujba (also spelt as“Druzhba”) clusters in southeast Guinea, the Koidu and Tongo clusters in Sierra Leone, and theWeasua, Kumgbo and Mano Godua clusters of western Liberia (Skinner et al, 2005). The Koidukimberlites in Sierra Leone are dated at 146 Ma and the Droujba kimberlite in Guinea is dated at 153Ma. Two kimberlites in the Weasua cluster, Liberia, have been dated as Neoproterozoic (~800 Ma)(Skinner et al, 2005), whilst two other clusters in Liberia are undated.3.2 Resources3.2.1 Stellar’s Guinea PropertiesStellar has –• a wholly owned interest in a 14km 2 semi-industrial alluvial diamond mining permit,termed the “Mandala Permit”, where bulk sampling is currently underway on a213,000m 3 at 0.6914ct/m 3 Measured Resource of gravel and a 1,419,000m 3 at0.373ct/m 3 Indicated Resource of gravel which taken together are estimated tocontain 676,000cts of diamond at a current value of US$30.73/ct.• a wholly owned interest in an 16km 2 exploration licence for alluvial diamonds alongthe Ouria river, the “Ouria Permit”, which is adjacent to the Mandala permit, wherean historical resource estimate (Sutherland 2004), estimated an inferred resource of160,000 cts. over an area of 200,000m 2 . This estimate has now been reviseddownwards as a result of artisan mining activities since 2004. The current InferredResource is 114,000cts over an area of 157,500m 2 (grade of 0.8ct/m 2 or 38.09cpht)estimated to have a value of US$30.73/ct.• a 100 per cent. ownership of three exploration licences totaling 198km 2 termed the“Bouro permits” which extend over both the Mandala and Ouria alluvial diamondpermits and where De Beers will derive a 2 per cent. royalty on gross sales interestif put into production.There is insufficient evidence at present of geological continuity and diamond gradeto calculate any more than an Inferred Resource of 107,600 tonnes at 182.5cpht inthe Bouro North dyke. However, the micro-and macro-diamond sampling work byDe Beers, Mano and Stellar and field mapping of the lateral extent of the BouroNorth dyke suggest a speculative exploration target of some 13 million tonnes atgrades between 182.5cpht and 400cpht. This could yield between 23 million and52 million carats. The Bouro North Dyke diamonds are assumed to be of similarquality to the Mandala alluvial diamonds at a current value of US$30.73/ct.• A 100 per cent. ownership of two kimberlite diamond exploration licences totaling279km 2 over the Droujba kimberlite pipe, the “Droujba Permits”.There is insufficient evidence of geological continuity and diamond grade data tocalculate more than an Inferred Resource estimate for the Droujba pipe. Sutherland,2007, suggests that the pipe is only a shallow faulted remnant and has little depthextent and is only likely to be some 200,000 tonnes in size, while the geophysicalsurveys suggest that the size of the pipe may be double Sutherland’s interpretation.We therefore estimate the Inferred Resource to be 200,000t and a highly speculativeexploration target of up to 400,000 tonnes at a grade of 80.08cpht, which equates tobetween 160,000 and 320,000cts. No modern valuation of diamonds from the pipehas been done.There is exploration evidence to suggest that there may be new, as yet undiscovered,kimberlites within the licence area, while Sutherland (op cit) suggests that there areas yet unmined alluvial deposits in the licence area.• Tangible net assets in Guinea as more fully described and valued in Appendix Cworth some US$3,807,971.87

3.2.2 WAD’s Guinea PropertiesWAD has –• A controlling interest in 2 exploration licences and 2 semi-industrial mining licencescovering some 29.05km 2 in the Soumbaya District along the Bomboko river, calledthe “Bomboko Project”.WAD is currently engaged in a bulk sampling program within the project area.Without sufficient proof of lateral continuity and grade of the deposit, we are only ableto estimate an Inferred Resource of 1 million tonnes of gravel at the current bulksample grade of 4.06 cpht, which translates to 40,600cts. Elford and Acheson, 2008,suggest that at Bomboko there is an exploration target of some 8 million tonnes at aglobal grade of between 8.125 and 9.75cpht (650,000 to 780,000cts). In our estimatesthis speculative exploration target is reduced by the amount classified as an InferredResource and we therefore estimate a speculative exploration resource of 7 milliontonnes at grades between 8.125cpht and 9.75cpht (570,000cts to 683,000cts). Thecurrent value of Bomboko production is estimated to be US$121.59/ct based on thesale of a 670.44ct parcel of diamonds sold by tender on 3 December 2009.• A 100 per cent. owned interest in a 22km 2 exploration licence for both primarysource and alluvial diamonds in the Bounoudou area over the Droujba kimberlitepipe, associated kimberlite dykes and alluvial deposits, the “Droujba Project”.The reader is referred to the section above dealing with Stellar’s Droujba licences.Please also refer to a discussion on the licence conflict in sections 4.1.4 & 4.1.6 below.• A 100 per cent. interest in net tangible assets in Guinea as listed in Appendix C, witha value of US$2,102,105All of the Stellar and WAD Guinea Properties are located in the Guinée ForestièreProvince of Guinea, West Africa. The various properties are held through localsubsidiary companies and the details of each licence are given in Appendix A.3.2.3 Stellar’s Sierra Leone PropertiesStellar has –• A 49 per cent. interest in two adjoining exploration licence areas totaling 206km 2 inpartnership with Petra Diamonds Ltd in the Koidu District of eastern Sierra Leone,known as the “Kono Project”.The partners have completed geological mapping, an airborne EM survey, stream,loam and trench sampling, and trial mining programs in the project area. Theprograms have outlined a series of kimberlite dykes, the total strike length of whichis estimated to exceed 17km (Sobie and McGeorge, 2008). After initial evaluations,the higher grade dykes, Lion-5 and Lion-7 were selected for trial mining.The lack of proof of sub-surface lateral and depth continuity to the kimberlite dykesresults in the estimation of only a net 49 per cent. attributable Inferred Resource forthe Pol-K and Bardu shaft areas of 23,500 tonnes at 37.31cpht (8,768cts) for Pol-Kand 16,700tonnes at 27.90cpht (4,659cts) for Bardu. The diamonds are valued atUS$84.91/ct for Pol-K and US$51.84 for Bardu. Note that these prices representsales during the market downturn of 2009 and that a parcel of 880 carats of Pol-Kdiamonds sold for $152 per carat in September 2008.Sobie and McGeorge, 2008 estimated a speculative total exploration target of from713,000 to 5.88 million tonnes containing some 356,000 to 4.7 million carats for thetwo dykes (note that Stellar is only entitled to 49 per cent. of this speculative target).• A 100 per cent. interest in an Exploration Licence for diamonds covering an area of33.12km 2 in south-eastern Sierra Leone known as the “Tongo Project”.88

Stellar and BHP-Billiton originally explored a very extensive district which resultedin the detailed exploration of the Tongo Project. In March 2008, BHP-Billitonwithdrew from the joint venture.Exploration to date has defined four kimberlite dykes, Dykes 1-4, from which24 mini-bulk samples of some 1 tonne each were excavated and yielded high qualitydiamonds with indicative sampling grades of up to 385 cpht. Six samples were alsosubmitted for micro-diamond analysis and indicate grades in excess of 500 cpht. Atotal of 20 inclined core drillholes totaling 1219.4m has shown lateral continuity ofthe dykes to shallow depth and two bulk samples of Dykes 1 & 4 (144.45 tonnes and53.82 tonnes) indicate grades of 90 cpht for Dyke 1 and 100 cpht for Dyke 4 (Sobie& McGeorge, 2008 and Oosterveld 2007 & 2009).The Dyke 1 & 4 bulk sampling parcel of 183.4cts was valued by the government valuerfor export in November 2008 at an average of US$189/ct; The same parcel was valuedby Stellar’s sales agent in Antwerp in November 2008 at US$124/ct, however on sale inMay 2009, the parcel only fetched a price of US$61/ct. It is Stellar’s opinion that acurrent, conservative average value of US$100/ct could be applied to theTongo production (Dykes 1 & 4 being valued by Stellar at US$150/ct & US$50/ctrespectively) based on the current price trend as illustrated in the first graph in section 9.An Inferred Resource of 26,500 tonnes at a grade of 89.79cpht (23,794cts) has beenestimated for kimberlite Dyke-1 and 26,500 tonnes at a grade of 99.79cpht(26,444cts) for kimberlite Dyke-4. A speculative exploration target of 1.5 milliontonnes for each dyke at grades between 90cpht and 100cpht has been estimated.• A 49 per cent. interest in certain tangible net assets in Sierra Leone as more fullydescribed in Appendix C estimated to have a value of US$926,051 (this is49 per cent. of the total asset value of US$1,889,900).3.2.4 WAD’s Sierra Leone PropertiesWAD has –• A 20 per cent. free carried interest in an exploration licence located in theKoidu District of eastern Sierra Leone measuring some 67.64km 2 which is known asthe “Pipe 3 Project” and which is adjacent to Stellar’s Kono licences.WAD’s joint venture partner, Thunderball Limited, will operate the exploration of thelicence area and be wholly responsible for the expenditure.Exploration to date has consisted of mapping, geophysics and bulk sampling. Some14.8Km of kimberlite dykes have been mapped on the property and bulk sampling ofPipe 3 treated 20,438 tonnes of material to yield 5,670 diamonds at a grade of5.26cpht. Due to inadequate processing, the grade was thought to be underestimated;WAD therefore re-treated their tailings and recovered further diamonds allowingthem to estimate a true grade to be in the range between 9.2 and 19.33cpht withdiamond values estimated to be in the order of US$200/ct. in August 2008. (Elfordand Acheson, 2008).The Pipe 3 Project is unlikely to be commercially viable in our opinion and no valuecan be attributed to it.• A 5 per cent. net smelter royalty interest in a Mining Lease located in theKoidu District of eastern Sierra Leone measuring 2.17km 2 which is known as the“Dump 11 Project”.The operator of the Dump 11 project is Pyramid Resources who will carry out allfuture exploration and development of the project and will be wholly responsible forany expenditure.89

There is no definitive estimate of the size of the dump and initial bulk sampling of45,275 tonnes of dump material through a gold recovery circuit followed by adiamond circuit yielded grades of 1.8 cpht for diamonds and some 0.05g/t gold.Further bulk sampling for gold and diamonds yielded diamond grade estimates of1.35 cpht and gold grade estimates of 0.04g/t from the 162 tonnes treated (Elfordand Acheson, 2008). These results suggest that the dump retreatment project iscurrently not commercially viable and no value can be attributed to this project.WAD is holding a diamond and gold prospecting licence EPL11/2002 in trust for thebenefit of Pyramid Resources pending a reduction of the licence area to three smallerareas and conversion of these three areas to Exploration Licence (EXPL) status.WAD will be entitled to receive a 5 per cent. net smelter royalty from any commercialmineral production from these properties.WAD has no net tangible assets in Sierra Leone.3.3 Deposit Types & Exploration MethodologyMineralisation is in the form of gem, near-gem and industrial quality diamonds, contained eitheras xenocrysts within the kimberlite dykes and a pipe, or as clasts within alluvial gravel bedsderived by the weathering and erosion of these kimberlites.Diamonds are present in a wide range of sizes, from microscopic to, in some cases, quite largestones. However, rough diamonds below 0.82mm (.006ct weight or Diamond Trading CompanyNo 1 sieve size) are considered to have little commercial value. Often the minimum size of roughdiamond considered to be of value is 1mm or 0.01ct.The diamond deposits on the WAD and Stellar Properties are of three types:1. Diamondiferous alluvial gravels, beneath terraces and present day flood plains of theMandala, Ouria and Bomboko rivers, and in rivers and flats surrounding the Droujbakimberlites particularly the Diani and Avili rivers.2. Kimberlite dykes, occurring as zones of en echelon dykes and veins, as at Mandala andBouro and which also occur in the area surrounding the Droujba pipe and in the SierraLeone properties.3. The Droujba kimberlite pipe occurring at the intersection of two dykes in the vicinity ofBounoudou village.In the Mandala/Ouria valleys the Soviet aid programs of the 1960s, followed by the work of StarGuinée and SearchGold Resources, established the link between the kimberlite dykes and thealluvial deposits.The style of the deposits is similar to that seen elsewhere in West Africa, for example the alluvialdeposits of the Banankoro area in Guinea, and the dykes and alluvial deposits in the Koidu areaof Sierra Leone (McGeorge, 2007).Both the dykes and alluvial diamond deposits have been worked by artisan miners.Commercial scale bulk sampling is in progress to test both the alluvial deposits of the Mandalaand the Bomboko streams as well as the kimberlite projects in Sierra Leone.3.3.1 KimberliteKimberlite is an alkaline ultramafic igneous rock that is generated at great depths in theearth and emplaced at the surface as highly explosive volcanic eruptives. Weathering anderosion of the upper portions of the eruptive – the caldera and associated breccias, tuffs andcountry rock clastics is common leaving the lower “pipes” and feeder dykes and sills.Diamond-bearing kimberlites are only found on ancient, stable, cool portions of the crustknown as “cratons”. Kimberlites, and a closely related variety called lamproite, are the onlyknown primary source of commercial diamond deposits.90

Exploration for diamond bearing kimberlites starts with the definition of unexplored portionsof cratons. The kimberlites usually have distinctive and discrete dipolar, circular magneticsignatures accompanied by circular gravity “lows”. Geophysics, particularly airbornemagnetics, is usually the first method used to locate new kimberlites, followed up by groundmagnetic and gravity surveys.Stream and soil sampling for kimberlite indicator minerals (“KIM’s”) is also employed tolocate new kimberlite occurrences. Kimberlites have a very distinctive mineral compositionand recovery of these minerals from stream and soil sampling campaigns is used not onlyto locate the buried kimberlite source rock, but also, by determining the chemicalcomposition of individual KIM grains, to estimate the diamond bearing potential of thekimberlite occurrence.Evaluation of kimberlites usually follows a standard procedure. Core drilling campaignsdefine the extent and morphology of the intrusive, while samples of the core are subjectedto micro-diamond analysis to obtain an indication of the possible diamond grade of thekimberlite. These campaigns, if positive, are followed up by bulk sampling or trial miningto test representative quantities of the different varieties of kimberlite so as to obtainsufficient data for an estimate of ore volume, diamond grade and diamond values.Kimberlite intrusions are often composite, and made up of several different kimberlitelithologies or “facies” which have been intruded during successive eruptive episodes, so thatone may cut into the other.The dykes in Stellar’s Guinea Bouro licences have been shown to be composite dyke zones.The diamond grade, and quality of diamonds, varies between different dykes within onezone, and between zones, therefore a good geological understanding of the dykes andlithologically controlled sampling are important in their evaluation. Kimberlite facies mayalso vary in the proportion of country rock xenoliths they contain, which impacts on thegrade – the greater the proportion of xenoliths the more the grade is diluted. They may alsovary in metallurgical properties, resulting in varying plant efficiencies (McGeorge, op cit.).The Droujba pipe kimberlites in Guinea are virtually unreported and future exploration willbe aimed at collecting data to estimate diamond grade, quality and value but also todetermine the lithological type(s), their relationship and confirming the Soviet AidMission’s estimate of the amount of country rock xenoliths as being between 10 per cent.and 20 per cent. by volume.At Stellar’s Kono project in Sierra Leone, 10 separate kimberlite dykes, the Lion Dykes,have been mapped over a total strike length of some 17Km. Artisan miners have mined theassociated elluvial deposits and the weathered sections of the kimberlite dykes. Followingdyke sampling, exploration has been focussed on trial mining of the most promising dykes,Lion 2, 3, 5 & 7.At Stellar’s Tongo project in Sierra Leone four kimberlite dykes have been traced over atotal strike length of some 4Km. Mini-bulk samples and micro-diamond sampling haveassisted in selecting the most promising dykes. A program of 20 core drillholes has beencompleted to explore geophysical anomalies. Results to date indicate encouraging gradesand high value diamonds. Underground trial mining has been proposed.WAD’s bulk sampling program of its Dump 11 project on ML1/04 in Sierra Leone has yieldedpoor results and the project has been farmed out to another operator for further exploration.WAD’s bulk sampling of the Pipe 3 kimberlite in its Sierra Leone EXPL 8/2002 permit hasshown that the expected larger, high-value diamonds are not present and this, combinedwith disappointing grades has devalued the project. The further exploration of thekimberlite and other possible target kimberlites in the licence has been farmed out toanother operator, Thunderball Ltd., while WAD retains a 20 per cent. free-carried interestto production.91

ConclusionsAll of the Stellar and WAD kimberlite projects are at an advanced stage, where kimberlitedykes and small pipes have been located and exploration of the occurrences is now at theevaluation stage. Further drilling to define continuity, bulk sampling and trial miningpreparatory to feasibility studies are underway or planned. The more marginal projects,such as WAD’s two Sierra Leone projects have been farmed out to third parties whileretaining participation rights.3.3.2 Alluvial DepositsAlluvial, colluvial (slope or gravity-fed) and elluvial (weathered in-situ) diamond depositsare all derived from the weathering and erosion of primary source kimberlites (andlamproites) and the release of diamonds into the secondary environment. Diamond,because of its hardness and above average specific gravity (3.5 versus overall crustalaverage of 2.6) survives abrasion in river and glacial transport and usually concentrates inthe base of the stream load or in stream bed trap structures along with other heavy minerals.The location of alluvial diamond deposits may be proximal or distal to the primarykimberlite source, but exploration for these deposits usually begins close to knowndiamondiferous kimberlites.Systematic evaluation of secondary diamond deposits usually begins with drilling usingaugur, percussion, reverse circulation or Bankha drills to estimate the lateral extent of thealluvial deposit and the thickness of overburden and target basal gravels. The morphologyof the bedrock is usually also determined during this phase as it can indicate the locationof the best stream bed trap structures where higher grades of diamonds can be predicted.Drilling is usually followed by bulk sampling to test for the grade of the deposit and toobtain a sufficiently large parcel of diamonds to predict an average value. Bulk samplingcan take the form of small hand-dug pits on a grid or the test mining of selected, widelyspaced locations using large earthmoving equipment.Alluvial diamond deposits may exhibit considerable grade variations within the resource,due to the sedimentological evolution of the diamondiferous gravels. While the grade willbe much less than in the source kimberlite, the average quality of the diamonds may behigher due to the destruction of poorer stones with increasing distance from source.Variations in coarseness, degree of cementation and clay content of the gravels can resultin varying metallurgical properties, and may impact on plant efficiencies. On the BouroProperties, the tributaries close to the kimberlite dykes show average diamond sizes of>0.3 ct/stone, with some >0.5 ct/stone. Along the Mandala River, the average size of thediamonds decreases from Mandala II, to Mandala III and Mandala IV, as the distance fromthe Bouro Central Dykes increases. Downstream of the Bouro North Dykes, in Mandala IVand V (beyond Stellar’s Mandala permit), there is a similar rapid reduction in diamond sizeto between 0.1 and 0.15 ct/stone (Sutherland 2004). There is very little lateritisation of thegravels (McGeorge & Sobie, 2007).Stellar’s Mandala project is at the large bulk sampling/trial mining stage and yielding betterthan predicted results while its adjacent Ouria alluvial project is at a very preliminary stageof evaluation.WAD’s Bomboko alluvial project is at an early bulk sampling stage but requires collationof historical and early phase sampling data followed by further systematic drilling andpitting to estimate the grade and extent of the deposit.The colluvial and alluvial potential of the Droujba licence area has still to be tested, butpreliminary indications are that these will be positive (Sutherland, 2007).3.3.3 Diamond Recovery MethodsDiamonds are universally recovered by using gravity separation techniques to arrive at aconcentrate of heavy minerals which can then be sorted, either manually or mechanicallyto extract diamonds. A typical diamond recovery plant employs crushing for kimberlites92

and cemented alluvial feed followed by sizing of the material over various sieves, thencegravity separation. The common gravity separation techniques employed are various formsof jigs, rotary pans and dense media separation (DMS) using cyclones.Mechanical final recovery of diamonds from concentrates usually employs one or moreunique physical characteristic of diamond to distinguish it from other heavy minerals.Water does not “stick” to the surface of diamonds and passing a stream of water carryingthe concentrate over grease tables or belts results in the diamonds adhering to the greasewhile other, “wettable” minerals are washed over the grease bed. Diamonds fluoresce whensubjected to x-rays and this property allows for mechanical separation of the fluorescingparticles in a sorter. The recovered diamonds are then hand sorted and safely stored.Strict plant security at all stages of the process is required to ensure the full recovery ofall diamonds.4. Description and Location of Assets4.1 Guinea Property DescriptionsIn Guinea the administration of exploration and mining licences are under the jurisdiction of theMinistry of Mines and Geology. A department within the Ministry, The Directorate of Mines, dealswith mining licences, and another department, the Centre for the Promotion and Development ofMines deals with exploration licences. The Mining Code governs the terms and conditions for thegrant of licences. Exploration licences are granted for a period of two years, renewable for furtherperiods if work commitments are being met. Although it is not codified, it has become commonpractice for the issue of separate licences over the same ground for alluvial and for primary(kimberlite) exploration. Semi-industrial mining licences are granted for a period of 5-years and arerenewable; these licences allow bulk sampling. Mining licences are granted for 20-year periods onthe submission of a positive feasibility study and the State is then entitled to participate, to amaximum 15 per cent., in any mining entity.4.1.1 Stellar’s Mandala LicenceThe Mandala licence was originally granted by the Ministry of Mines and Geology of theRepublic of Guinea under Decree No.A2000/1010/MMGE/SGG dated 20 April 2000 infavour of Mrs. Walta Kandé and Marie Mansaré; it was a semi-industrial alluvialdiamond exploitation licence measuring 14.00 square kilometres in extent. The licence issituated in the Kérouané Préfecture (see Map 4 below) with the corner co-ordinates asdetailed in Table 2 and Appendix A below.A semi-industrial exploitation licence grants the holders the right to bulk sample alluvialdiamond deposits; the licence is granted for a period of 5 years, renewable for furtherperiods of 5 years on condition that the licence is being exploited. The licence was renewedon 14 July 2005 for a further period of 5 years, and re-issued under Decree NumberA2005/3117/MMG/SGG. Stellar and its predecessor, SearchGold Resources, explored andbulk sampled the deposit under the terms of an agreement with the original licence owners.In a judicial review during 2008, the original licence holders were denied further rights andtitle to the licence and it was re-issued in the name of Societe Ressources Mandala GuinéeSarl (“RMG”) under Arrete No. A 2008/3640/MMG/ SGG. RMG is a wholly ownedsubsidiary of Stellar and the licence is valid until 25 September 2013, but renewable for afurther 5-year period.4.1.2 Stellar’s Ouria LicenceThe Ouria licence was granted by the Ministry of Mines and Geology of the Republic ofGuinea under Decree No.A2003/5052/MMGE/SGG dated 26 March 2003 in favour ofSociete Ressources Mandala Guinea SARL; it is an alluvial diamond exploration licencemeasuring 16km 2 in extent.93

The licence is situated in the Kérouané Préfecture (see Map 4 below) with the cornerco-ordinates as detailed in Table 2 and Appendix A below.This exploration licence grants the holders, RMG, the right to explore for alluvialdiamonds within the boundaries of the licence. The licence is granted for an initial periodof two years, renewable for successive periods of two years providing exploration is beingconducted on the licence. The licence was renewed by the Ministry on 14 July 2005 byDecree No. A2005/3118/MMG/SGG for a further period of 2 years and again on26 September 2008 by decree No.A2008/3639/ MMG/SGG, which renewal will expire on25 September 2010.The licence is located immediately to the west of and partly contiguous with the Mandalalicence (See Map 3 below).4.1.3 Stellar’s Bouro Kimberlite LicencesThese three mining research licences to explore for kimberlite were granted by the Ministry ofMines and Geology of the Republic of Guinea by Decree No.A2005/1767, 1768 &1769/MMG/SGG dated 6 May 2005 in favour of Societe Mano River Diamants Guinee SA(“MRDG”), a subsidiary company of Stellar. An application to renew the licences for adecreased area is currently in progress.The three licences to be renewed are situated in the Macenta and Kérouané Préfectures (seeMap 4 below) and the renewed licences will have corner co-ordinates and surface areas asdetailed in Table 2 and Appendix A below.These exploration licences grant the holders, MRDG, the right to explore for primarysource diamonds within the boundaries of the licences. The licence is granted for an initialperiod of two years, renewable for successive periods of two years providing exploration isbeing conducted on the licence. In March 2007, MRDG submitted written renewaldocumentation but this was lost in the Ministry and a further set of documents wererequested and lodged on 29 June 2009. There is no reason to believe that this renewalrequest will not be granted.The three licences are located to include all of the Bouro kimberlite dykes and thereforeextend over and surround the Mandala alluvial licences. Since Stellar has contracted withthe De Beers Guinea subsidiary company, Debsam, to obtain its exploration data from thisarea, a 2 per cent. net profit royalty is payable to De Beers if any of the kimberlites arebrought into production.94

Map 4: Location of Mandala, Ouria and Bouro Licences4.1.4 Stellar’s Droujba kimberlite LicencesThe three research licences to explore for kimberlite were granted by the Ministry ofMines and Geology of the Republic of Guinea under Decree No.A2007/1290/MMG/SGG dated 28 March 2007 in favour of Societe FriendshipDiamond Guinee SA (“FDG”), now a wholly owned Stellar subsidiary.Licence renewal applications for reduced areas of these licences were submitted in March2009 (lost by the Ministry) and again in June 2009. The licences are now reduced to twoblocks and are situated in the Macenta and Kérouané Préfecture and have cornerco-ordinates and surface areas as detailed in Table 2, Appendix A and Map 5 below.The licences conflict with those of WAD’s (see paragraph 4.1.6 below). WAD applied for alicence to explore for “Diamonds and associated minerals” over the Droujba area and Stellarsimultaneously applied for a licence to explore for “Primary Diamonds” over the Droujbaarea. The Ministry granted both licences because it was common practice that “Diamonds andassociated minerals” referred to alluvial diamonds; however WAD have argued that thisdistinction does not exist in the Mining Code. The Ministry refused to adjudicate theconflicting rights granted to the two parties, but a resolution was reached between Stellar andWAD, in that as part of the merger the licences will be combined, however if the merger failedfor any reason then a 50:50 joint venture would be established over both licences. TheMinistry has not issued renewed licences to either WAD or Stellar pending finalisation oftheir negotiations.The exploration licences grant the holders, FDG, the right to explore for primary sourcediamonds within the boundaries of the licences. The licences are granted for an initialperiod of two years, renewable for successive periods of two years providing explorationis being conducted on the licence.95

FDG is now a 100 per cent. owned Guinea subsidiary company of Stellar following thepurchase of the company from Mano Diamonds Limited (70 per cent.) and CompagnieDes Diamants Etoilés SA (30 per cent.). The sale consideration for Mano Diamonds Ltd was$128,241 (the amount expended by Stellar on the licence) and for Compagnie Des DiamantsEtoilés SA (30 per cent.) was $55,218, both in Stellar shares. This transaction was completedon 20 October 2009.Map 5: Location of Stellar’s Droujba Licences96

Table 2: List of Stellar Guinea Licences(Note: the Guinea government is entitled to obtain a 15 per cent. interest in any mining venture)Latitude Longitude Surface Stellar’sLicence No. Point North West Area km 2 Beneficial Interest2008/3640 A 8 ° 48’ 41” 9 ° 20’ 23” 14.00 100%(Mandala semi Industrial B 8 ° 48’ 41” 9 ° 18’ 10”mining licence) C 8 ° 46’ 44” 9 ° 18’ 10”D 8 ° 46’ 44” 9 ° 20’ 23”A2008/3639 A 8 ° 49’ 18” 9 ° 22’ 34” 16.00 100%(Ouria alluvial Exploration B 8 ° 49’ 18” 9 ° 20’ 23”licence) C 8 ° 47’ 07” 9 ° 20’ 23”D 8 ° 47’ 07” 9 ° 22’ 34”Renewal Application (Bouro I) A 8 ° 50’ 00” 9 ° 25’ 00” 65.00 100%Central Area B 8 ° 50’ 00” 9 ° 15’ 00” De Beers has a 2% netC 8 ° 48’ 00” 9 ° 15’ 00” royalty interestD 8 ° 48’ 00” 9 ° 25’ 00”Renewal Application (Bouro II) A 8 ° 54’ 00” 9 ° 25’ 00” 65.00 100%North Area B 8 ° 54’ 00” 9 ° 15’ 00” De Beers has a 2% netC 8 ° 52’ 00” 9 ° 15’ 00” royalty interestD 8 ° 52’ 00” 9 ° 25’ 00”Renewal Application (Bouro III) A 8 ° 48’ 00” 9 ° 25’ 00” 68.00 100%South Area B 8 ° 48’ 00” 9 ° 16’ 50” De Beers has a 2% netC 8 ° 47’ 50” 9 ° 16’ 50” royalty interestD 8 ° 47’ 50” 9 ° 17’ 50”E 8 ° 46’ 20” 9 ° 17’ 50”F 8 ° 46’ 20” 9 ° 19’ 00”G 8 ° 44’ 50” 9 ° 19’ 00”H 8 ° 44’ 50” 9 ° 25’ 00”Renewal Application (Droujba 2) A 8 ° 36’ 00” 9 ° 10’ 00” 181.00 100%Southern block B 8 ° 36’ 00” 9 ° 02’ 00”C 8 ° 35’ 00” 9 ° 02’ 00”D 8 ° 35’ 00” 9 ° 00’ 55”E 8 ° 30’ 00” 9 ° 00’ 55”F 8 ° 30’ 00” 9 ° 10’ 00”Renewal Application (Droujba 1) A 8 ° 41’ 45” 9 ° 10’ 00” 98.00 100%Northern block B 8 ° 41’ 45” 9 ° 05’ 00”C 8 ° 36’ 00” 9 ° 05’ 00”D 8 ° 36’ 00” 9 ° 10’ 00”Total Area 507km 297

Figure 1: Organisation Organogram for Stellar Diamonds4.1.5 WAD’s Bomboko Alluvial LicencesThe Bomboko project was located on six contiguous Prospecting and one Semi-IndustrialMining Licence granted to African Diamonds and three Guinean companies. On 8 December2006 WAD purchased one of the companies, Castlebay Resources Ltd. The vendors areentitled to receive a 3 per cent. royalty calculated on the Government valuation for export ofany diamonds or gold produced within the licence. WAD have a two-year option to acquirethe licence owned by MacGregor Crowe Limited once that licence is converted to a semiindustrialmining licence in exchange for a 3 per cent. royalty calculated on the Governmentvaluation for export of any diamonds or gold produced within the licence. The newly renewedand applied for licences have been granted and agreed by the Ministry, but final licencedocuments have still to be issued.The corner co-ordinates and other details in respect of the new licences are detailed inTable 3 below and Appendix A and the physical location is shown in Map 6 following. Thelicences are in the Soumbaya District along the Bomboko River and tributary streams.The two semi-industrial mining licences allow WAD to bulk sample the deposit underlying thelicence area. Licence A2009/2667 in the name of Castlebay Resources Ltd is valid untilOctober 2014 and Licence A2005/1211 in the name of African Diamonds plc is valid to11 March 2010 with further renewable periods of 5 years.The two exploration licences will be valid to 8 October 2011 and grant the right to explorefor alluvial diamonds within the boundaries of the licence. Exploration licences are grantedfor an initial period of two years, renewable for successive periods of two years providingexploration is being conducted on the licence.98

Map 6: Location of WAD’s Bomboko Licences4.1.6 WAD’s Droujba Kimberlite and Alluvial LicenceThe licence 2007/820/MMG/SGG was granted on 1 March 2007 to WAD and anapplication for a two-year renewal was submitted on 23 January 2009 but has not beenfinalized yet. There is no reason the authors are aware of at this time why this renewalshould not be granted once the conflicting interests between WAD and Stellar have beenresolved by either the contemplated merger of the companies or a joint venture agreementto explore the area is finalized.The corner co-ordinates for the licence and other details are listed in Table 3 below andAppendix A and the physical location is shown in Map 7 following. The licence is in theBounoudou District and is centred on the Droujba kimberlite pipe. Please note that this licencelies mostly within the licence area (see Map 7, below) granted to Stellar’s subsidiary company,Friendship Diamonds Guinée.This exploration licence grants the holder, WAD, the right to explore for “Diamonds andAssociated Minerals” which was commonly regarded as being an alluvial diamondexploration licence. WAD has argued that the distinction between alluvial and primarydiamonds is not codified and it is therefore entitled to explore for both alluvial and primarysource (kimberlite) diamonds within the boundaries of the licence; should the proposedmerger with Stellar not go ahead, WAD and Stellar have already agreed to enter into a50:50 joint venture to explore the three overlapping licences.The licence is granted for an initial period of two years, renewable for successive periodsof two years providing exploration is being conducted on the licence.99

Map 7: WAD’s Droujba Licence and the Stellar Droubja Licences100

Table 3: List of WAD’s Guinea Licences(Note: the Guinea government is entitled to obtain a 15 per cent. interest in mining ventures)Latitude Longitude Surface WAD’s InterestLicence No. Point North West Area km 2 Beneficial Interest2005/1211 A 9 ° 03’51” 9 ° 34’06” 7.0 100%Semi-Industrial B 9 ° 03’51” 9 ° 33’24” Owned by AfricanMining Licence (Bomboko) C 9 ° 03’52” 9 ° 33’24” Diamonds plc 3D 9 ° 03’52” 9 ° 31’55”E 9 ° 02’15” 9 ° 31’55”F 9 ° 02’15” 9 ° 33’00”G 9 ° 03’00” 9 ° 33’00”H 9 ° 03’00” 9 ° 34’06”2009/2667 A 9 ° 03’50” 9 ° 30’16” 8.0 100% but a 3%Semi-IndustrialMining Licence (Bomboko)royalty is due to thevendors ofthe companyB 9 ° 03’50” 9 ° 30’00” Owned by CastlebayC 9 ° 02’17” 9 ° 30’00” Resources LtdD 9 ° 02’17” 9 ° 31’55”E 9 ° 03’30” 9 ° 31’55”F 9 ° 03’30” 9 ° 30’16”Previously 1 A 9 ° 07’00” 9 ° 30’00” 2.25 100% but a 3%2006/7101 royalty is due to theBlock 1vendors ofExploration Licencethe companyB 9 ° 07’00” 9 ° 28’35” Owned by CastlebayC 9 ° 06’15” 9 ° 28’35” Resources LtdD 9 ° 06’15” 9 ° 30’00”Block 2 A 9 ° 03’50” 9 ° 30’00” 5.6(Bomboko) B 9 ° 05’00” 9 ° 28’35”C 9 ° 03’34” 9 ° 28’35”D 9 ° 03’34” 9 ° 30’00”Previously A 9 ° 03’00” 9 ° 35’00” 6.2 100% but a 3%2005/4154 royalty is due to theExploration Licence(Bomboko)vendors of thiscompany once theoption to purchaseis exercisedB 9 ° 03’00” 9 ° 33’00” Owned byC 9 ° 02’05” 9 ° 33’00” MacGregorD 9 ° 02’05” 9 ° 35’00” Crowe Ltd2007/820 A 8 ° 36’05” 9 ° 04’00” 22.0 100%Exploration Licence B 8 ° 36’05” 9 ° 00’00” owned by WAD(Droujba) C 8 ° 32’05” 9 ° 00’00”D 8 ° 32’05” 9 ° 04’00”Total Area 51.05N.B.(1) The licences marked “Previously” reflect the original licence numbers. The new numbers will be assigned once the finallicences are issued.(2) The co-ordinate marked in red in the above Table is mistakenly listed as being 9 ° 30”30’ in the Ministry’s draft licence.(3) We are uncertain whether African Diamonds plc have ceded ownership of their licence and /or their rights to WAD.101

4.1.7 Guinean LiabilitiesWe have been informed by the respective managements that neither Stellar nor WAD haveany Environmental, Social Development, Infrastructural or other liabilities in respect of theGuinean licences described above.4.2 Sierra Leone Property DescriptionsIn Sierra Leone, exploration is governed by the Mines and Minerals Decree of the 4 March 1994,administered by the Ministry of Mineral Resources with licence applications considered by anindependent Mineral Advisory Board. Exploration Licences (“EL’s”), Exclusive ProspectingLicences (“EXPL’s”) (which allow bulk sampling/trial mining) and Mining Leases (“ML’s”) arethe three categories of Mineral licences. EXPL’s and EL’s are issued for an initial 3-year periodfollowed by two 2-year renewal periods which are granted on application provided sufficientexploration work has been completed. The Code requires reduction of the licence area by50 per cent. on each renewal, but this may be waived if sufficient motivation can be provided. AMining Lease for a maximum 25 years, renewable for 15 years, can be applied for on productionof a positive feasibility study covering both technical and financial aspects of the project.4.2.1 Stellar’s Kono Kimberlite Exploration LicencesThe two Kono exploration licences (EXPL 3/05 & 4/05) are granted to joint venturecompany, Basama Diamonds (SL) Ltd., which is owned 51 per cent. by Petra DiamondsLimited (“Petra”) and 49 per cent. by Stellar.The licences were originally granted to Mano River Resources in 1998. A long period offorce majeure followed until 2002 when the civil war officially ended. The 1998 licenceswere suspended but remained valid and were viewed therefore as beginning in February2002; on 1 February 2005 the licences were transferred from Mano River Resources to thenewly formed Basama Diamonds and the licences were re-issued in Basama’s name. As at1 February 2008 the full area of the licences were renewed and are valid to31 January 2011. The further details are shown in Table 4 below and Appendix A andMap 8 following.In order to earn its interest, Petra, as Operator of the project spent US$3 million in trialmining at Kono. In May 2009, the partners decided to cease active trial mining due to thepoor state of the diamond market and place the project on care and maintenance.On 20 December 2008 Stellar Diamonds agreed to take over sole funding of the Konoproject for the duration of 2009. Stellar also assumed the role of manager and operator ofthe project. Petra has the option at the end of 2009 to either reimburse Stellar 51 per cent.of total project expenditure for 2009, expected to be US$1.08 million, or to dilute its equitystake in line with the dilution formula in the joint venture agreement which will result inStellar having 64 per cent. and Petra 36 per cent. of the project.102

Map 8: Location of the Kono Licence4.2.2 Stellar’s Tongo Kimberlite Exploration LicenceThe Tongo licence (EXPL 05/07) is held in the name of Sierra Diamonds Limited,(“Sierra”) a wholly owned subsidiary of Stellar. Having taken out a ReconnaissanceExploration licence of the SE corner of Sierra Leone and completed exploration over the9,500km 2 area, Sierra selected four areas for follow-up work, Tongo, Gola, Gorahun andZimmi. The Tongo, Gorahun and Zimmi licences were granted, however the Gola Forestlicence was refused on the objection of an environmental group. Although Stellarcompleted extensive exploration work on the Gorahun and Zimmi permits, they weresubsequently relinquished, leaving just the Tongo licence.The Tongo licence was initially granted on 17 August 2007 for two years, was renewed fora further two-year period in 2009 and is now valid to 16 August 2011. The licence coversan area of 33.12km 2 .The exploration of the greater region and of this licence was the subject of a joint venturewith BHP-Billiton Worldwide Exploration (“BHP”) which invested some US$3 million inthe project. In March 2008, BHP decided to withdraw from the joint venture and the currentexploration is being funded fully by Stellar, which now have a 100 per cent. beneficialinterest in the property.103

Details of the licence are summarized in Table 4 below and Appendix A and the location isillustrated in Map 9 following.Map 9: Location of the Tongo Licence104

Table 4: List of Stellar’s Sierra Leone LicencesUTM Zone 29, WGS 84Latitude Longitude Surface Stellar’s BeneficialPermit No. Point North West Area km 2 InterestEXPL 3/05 A 269000 950000 103 49%(Kono) B 279000 950000 owned byC 279000 953200 Basama Diamonds LtdD 284500 953284E 283700 943700F 270000 941600G 270000 944000H 269000 944000EXPL 4/05 MM14 269000 953000 103 49%(Kono) MM13 273000 953000 owned byMM12 273000 960000 Basama Diamonds LtdGL/1 283200 960000AM1 283834 958345AM7 283850 955350KP3 282662 954725KP2 282542 955042KP1 282268 955286KP10 282268 954363KP9 281930 954195KP8 281900 953650KP7 282276 953701KP6 282283 953340C 279000 953200B 279000 950000A 269000 950000EXPL 5/07 A 285110 916111 33.12 100%(Tongo) B 285110 911204 owned byC 282998 911293 Sierra Diamonds (SL) LtdD 279791 911297E 278512 916110RIVER BORDER FOLLOWS THEEAST BANK OF THE WOA RIVERTotal Area 239.124.2.3 WAD’s former Mining Licence 1/04, Kono DistrictThe ML1/2004 licence was held in the name of WAD and covers an area of 2.17 sq.Km.The licence is valid to 23 March 2012 and can be extended for a further period of 8 years.The licence surrounds a -1.5mm undersize tailings dump derived from the treatment ofalluvial material during the Selection Trust/National Diamond Mining Company era andis known as Dump 11.On 16 October 2009, the Directors of WAD concluded an agreement with PyramidResources whereby WAD will transfer to Pyramid Resources the mining lease and certainplant and equipment that are on the site in exchange for a 5 per cent. net smelter royalty ondiamonds produced.Details of the licence are summarized in Table 4 below and Appendix A and the location isillustrated in Map 10 following.105

An exploration licence, EPL11/2002 is being held in trust for Pyramid Resources pendingreduction of the area to three smaller areas and conversion of these to ExclusiveProspecting Licences. WAD will then transfer ownership to Pyramid Resources inexchange for a 5 per cent. net smelter royalty on diamonds or gold produced.Map 10: WAD’s Sierra Leone Licence and Stellar’s Kono Licences4.2.4 WAD’s former EXPL 8/2002 Licence, Kono DistrictThis exclusive prospecting licence was centred on the Pipe 3 kimberlite and associateddykes. The licence, which is adjacent to Basama’s licences, has an area of 67.64km 2 andwas granted on 1 December 2002. The Licence has been renewed and is valid until1 December 2010.On 16 September 2009, the directors of WAD announced the conclusion of a joint ventureagreement with Thunderball Limited, a private Japanese/Sierra Leone company to exploreand, if justified, develop a mine over the Pipe 3 kimberlite or any of the kimberlite dykesor over the Nimini Hills gold occurrence. Thunderball is the nominated operator and willown 80 per cent. of the project while contributing all of the expenditure up tocommencement of production. The EXPL8/2002 licence is being transferred from WAD toThunderball Limited.Details of the licence are summarized in Table 4 below and Appendix A and the location isillustrated in Map 10 above.106

Table 5: List of WAD’s Former Sierra Leone LicencesUTM Zone 29, WGS 84Latitude Longitude SurfaceLicence No. Point North West Area km 2 WAD’s Beneficial InterestML 1/04 A 279 781 962 096 2.17 5% Royalty if in ProductionB 280 561 960 996 Will be transferred toC 280 171 960 746 Pyramid Resources Ltd.D 280 591 960 096E 279 751 959 596F 278 991 960 896EXPL 8/02 A 284 441 953 096 67.64 20% free carried Interest toB 284 241 953 396 Production. Licence to beC 284 241 955 596 Transferred to Thunderball Ltd.D 283 841 955 496E 283 841 958 446F 283 191 960 096G 280 591 960 096H 280 171 960 746I 280 561 960 996J 279 781 962 096K 289 991 962 096L 289 991 952 096M 284 321 952 096EPL 11/2002 Unknown & will be reduced to threesmaller areas and converted to EXPL’sTotal Area 69.814.2.5 LiabilitiesWe have been informed by the respective managements that neither Stellar nor WAD haveany Environmental, Social Development, Infrastructural or other liabilities in respect of theSierra Leone licences described above.5. Overview of the Guinea Diamond Projects5.1 Stellar’s Mandala, Ouria and Bouro PropertiesThese alluvial and kimberlite licences are all situated within the Makona River basin and aredescribed together as the Mandala Properties:AccessibilityThe Mandala properties are located in the Macenta and Kérouané prefectures, province of GuinéeForestiére and are reached via some 900 Kilometres of tarred road from the capital, Conakry tothe nearest large town, Macenta. A 45 kilometre trip on secondary gravel road from Macenta toKabakoro village is followed by a 17 kilometre 4x4 track to the Mandala campsite. Stellar haveimproved this gravel road and track over the past two years so that heavy equipment could betransported to site and for the regular delivery of diesel fuel by tankers from Macenta.The Mandala properties can also be accessed by a poor 60km gravel road connecting to the townsof Banankoro and Kérouané, which service the nearby Aredor alluvial diamond deposits andwhere several mining companies and a heavy concentration of artisan miners historicallyexploited alluvial diamonds of very high average stone size and value.107

ClimateThe climate is monsoon tropical and generally hot and humid with annual rainfall of some2,000mm. The local rivers may rise 2 to 4m during a heavy rainstorm. The monsoonal-type rainyseason extends from June to November with southwesterly winds. The dry season is fromDecember to May, with dry, harmattan winds from the northeast. The daily temperature rangesbetween 28 ° C – 32 ° C maxima and 17 ° C – 19 ° C minima (CIA, The World Factbook, 2004).Any bulk sampling or mining program should take account of the very wet conditions during therainy season and accumulate, during the dry season, a large stockpile of gravels to be treatedduring this period when mining areas are flooded and haul roads become impassable.VegetationThe vegetation in the vicinity of the Macenta, Bouro and Ouria properties is influenced by the800m elevation and is typically tropical savannah with gallery forest in the river valleys.Local Resources & InfrastructureAlthough the Bouro area is rural and under-developed, the District has a long history of miningactivities and there should be an adequate supply of well-trained local personnel to provide therequired skills and labour for mining and for metallurgical processing activities. Unskilled andsemi-skilled labour is plentiful, and is drawn from the local communities. Skilled equipmentoperators and mechanics are readily available in the greater mining district.Access to spare parts, engineering services and other specialized services is reasonably good andcan either be sourced in Macenta, Banankoro or Kérouané or obtained by road from Conakry.Diesel fuel is trucked in by tanker on a regular basis from fuel depots in Conakry or N’Zerekore.At Mandala the camp-site has adequate accommodation for company officials and visitors in some14 bedrooms, 5 ablution blocks, a lounge area, and a central kitchen with adjacent dining area.Domestic electricity is supplied by a 25 KVA diesel-powered generator and domestic water ispumped from a well.Skilled staff and security staff are housed on site in brick and plaster huts, while unskilled labourall live in the local village.PhysiographyThe topography is hilly in the vicinity of the Mandala properties, with occasional outcrops ofdolerite and granite forming rounded steep-sided hills between 50m and 100m above the generalelevation of the valleys. The river valleys are poorly incised with wide flood plains (“flats”)extending some 25m to 50m from the normal banks and the lower terraces, marked by a 2m risein elevation, extending for a further 100m to 200m.The rivers are perennial with sufficient volumes to provide an adequate supply of process waterto any diamond recovery plant. During the rainy season, roads may be temporarily impassable andheavy rains will seriously affect open pit mining operations.Local Geology, History of Exploration & Results SummaryIn Southeast Guinea the bedrock consists predominantly of granites and granitic gneisses, cut bydolerite dykes and later kimberlite dykes and veins. The granites are often weathered to saprolite.Five distinct zones of kimberlite dykes are known in the upper Mandala Basin. At surface thekimberlite is deeply oxidized to a soft “yellow ground”. The dykes are always vertical or sub vertical.The landscape is the product of Tertiary uplift and erosion, and is relatively young, as evidencedby the topography and lack of lateritic development. Such a situation is favourable for thedevelopment of alluvial diamond deposits. The river courses are controlled by bedrock structure,and are incised along lines of faulting or brecciation, or on a more local scale, along joints.The dolerite dykes are relatively resistant to tropical weathering, and typically form areas ofpositive relief which cause deviations in the water courses.108

The Mandala River flows northward, towards its watershed with the Baoulé, but before thewatershed the Mandala turns abruptly towards the west, and then to the southwest (the Mandala“Bend”), after which its profile steepens (Map 9, below). The Mandala – Baulé watershed is low,and has the form of an old river valley and has diamond bearing gravels. The clear implication isthat the Mandala previously flowed to the north, into the Baoulé and towards the Niger, but wascaptured by a tributary of the Makona, which flowed to the southwest. In the northwards flowingpart of the Mandala, the present river course is in the east of the valley and the development ofterraces is limited to the west side of the valley. Thus at the same time as the river incised itscourse following its capture by the Makona, it migrated to the east, probably as a result of tectonicinclination of the landscape. Evidence from the N’Kéléyani valley, which flows NE to SW,supports this, as the principal terraces are developed on the northwest side of the valley(Sutherland, 1989).The better mineralization in the lower terraces and flats, noted by Star Guinée, is due todown-cutting in the upper Mandala basin after its capture by the Makona. This resulted in thestripping of the regolith from the kimberlite dykes, the erosion and reworking of higher terraces, andthe flushing of the Mandala’s tributaries, which became quite sharply incised (Sutherland op cit.).All of the Dyke zones, excepting the southern extension of the Extreme North en echelon dyke,are within the Stellar kimberlite exploration Permit areas (The “Bouro Permits”) as detailed inTable 2 above. The Kabakoro, or Bouro South Dykes, cross the sources of the Mandala. Theirdiamond content is very low.The Dykes du Camp, or Bouro Central Dykes, also sometimes called the Danko Dykes, cross theMandala valley close to the Mandala campsite, in section Mandala II. There are at leasttwo separate dykes on opposite banks of the Mandala. These dykes have much more pyrope intheir concentrates than the Kabakoro Dykes, although pyrope remains less abundant than ilmenite(McGeorge & Sobie, 2007). Their diamond content is low to moderate.Of all the dyke zones, the Bouro North Dykes have been traced for the greatest distance, at least5km and are thought to extend a further 4km westward. The thicknesses of the dykes vary froma few centimeters to more than 2m, and there are at least three distinct, more or less parallel, enechelon bodies.5.1.1 Early History of Guinea Diamond ExplorationAlluvial diamonds were first discovered in southeast Guinea in 1932, on the Upper MakonaRiver (Rombouts, 1987). The first commercial production in Guinea started in 1935. Thediamond fields of southeast Guinea are essentially within a triangle of which the towns ofKissidougou, Kérouané and Macenta form the corners.The drainage basin of the Makona River was prospected by the French company Soguinexwhich discovered a small but high grade alluvial deposit along the Koufanko stream, atributary of the Mamoya which is itself a tributary of the Mandala, close to the presentvillage of Bouro. This deposit was mined from 1944 to 1953, and is reported to haveyielded 100,000 carats with some sections having grades as high as 25ct/m 3 . Mining tookplace along about 1,300m of the river valley. No other details of this operation are available.Artisanal mining probably started concurrently with the Soguinex operation, and hascontinued ever since. It has been estimated that, prior to 1987, local artisanal miners hadrecovered about 100,000 ct, mainly from the area (Mandala IV) just north of the BouroNorth Dykes, and the upper Mandala Basin as a whole may have produced as many as500,000 ct (Sutherland, 1989).The first kimberlite in Guinea was discovered in 1952, but between 1963 and 1967geologists from the Soviet Union discovered 19 pipes and numerous dykes. During thisperiod, Soviet teams explored the area of the Mandala River and discovered the series ofkimberlite dykes, now called the Bouro dykes, which are the sources of the alluvialdiamonds (Rombouts, 1987). It was also during this time that the Soviet teams found theDroujba kimberlite pipe in the Bounoudou District.109

The Soviet teams decided to exploit the weathered zone of the Droujba pipe but no attemptwas made to establish resources for the Bouro dykes or the Mandala alluvial deposits in thearea. The Soviet work is not very well documented, at least in English and French and norecord of the Droujba production statistics can be found, although there are results ofexploration pitting and trenching in and around the pipe.Some of the Bouro dykes proved to be highly diamondiferous, and the local artisans tookto working the soft, oxidized, tops of the dykes and the alluvial deposits in tributariesdraining from the dyke outcrops.5.1.2 The Exploration by Star Guinée of the Alluvial Diamond DepositsThe most substantial exploration program in the Mandala area, which formed the basis ofall later work, was that undertaken by Star Diamond Corporation under its subsidiary StarGuinée between 1987 and 1989. The exploration work was contracted to well respectedEdinburgh based consultants Placer Analysis Ltd. led by Mr D G Sutherland.5.1.3 Historical Exploration of Mandala Alluvial DepositsThe work by Star Guinée along the Mandala and N’Kéléyani Rivers, within thesemi-industrial mining permit area now held by RMG (see Table 2 above), was part of awider diamond exploration program in southeast Guinea which initially covered 1,970km 2in the Makona River Basin. By means of a photo-geological interpretation, Star selectedsmaller areas for follow up and sampled the streams, flats and terraces of several streamsystems looking for diamonds and kimberlite indicator minerals. This work identified theMandala Valley as being a high priority area.Systematic sampling of the Mandala began from the first reasonably wide river flat belowthe source of the stream. A baseline was set-out, and traverse lines cut at 100m intervalacross the valley. The baseline and grid were divided for convenience into five sectionsalong the Mandala (Mandala I – V) and one section on the N’Kéléyani (see Map 11 below).Map 11: Location of the Mandala M I to M V Grid Baselines110

The nature of the alluvial sediments was first investigated by drilling, using a 6” powerdriven continuous flight auger, at 50m intervals along the traverse lines, giving a100m x 50m grid. Logging was done by retracting the rods every meter and noting thesediments held in the flights. In total, 779 holes were drilled in this way along the Mandalaand N’Kéléyani Rivers, of which 463 were within the present Mandala Permit of RMG(Villeneuve 2000).The drilling showed the presence and thickness of any gravels, and the thickness ofoverburden. The holes were drilled 0.5m into the saprolitic bedrock, and samples of graveland bedrock jigged to reveal diamonds or indicator minerals. The borehole collars wereleveled, allowing volumes of overburden and gravel to be calculated. Sampling pits werethen dug using a Poclain excavator, which made a pit with an area of 1.72m 2 and capableof reaching depths of 11.4m.Two pits were dug per sampling site where the sampling grid was 200m x 50m, and one pitwhere the grid was 100m x 50m. A total of 694 pits were dug, giving an excavated volumeof 1,181m 3 , which yielded 3,186 diamonds with a total weight of 478.04ct. Of the pits,379 were within the present Mandala Permit (Villeneuve, op. cit.) – the location of the gridand other features is shown in Maps 12 and 13 below.Bulk samples were taken at three sites – on the Mandala III and Mandala IV andN’Kéléyani grids, which together amounted to 566m 3 of ground, and produced2,090 diamonds with a total weight of 378.22ct. The bulk sampling was done to verify theestimated grade and also to obtain a larger parcel of diamonds for valuation purposes. TheConsultants, Placer Analysis Ltd, estimated a resource as shown in Table 6 below.Table 6: Mandala Project – Star Guinée Resource EstimateResourceSurface Area Average Grade EstimateGrid (sq.m.) (cts./sq.m.) (carats)Mandala II 230,000 0.20 46,000Mandala III 380,000 0.63 239,000Mandala IV upper 275,000 0.82 226,000Mandala IV lower 371,000 1.25 463,000Mandala V 170,000 0.75 128,000N’Kéléyani 408,000 0.51 208,000Totals 1,834,000 1,310,000111

Map 12: Mandala Project – Star Guinea Grid and Bulk Samples112

113Map 13: Mandala Project – Star N’Kéléyani Grid and Bulk Sample

Star Guinea relinquished the licences in the early 1990’s. In 2000, SearchGold ResourcesInc. (“SearchGold”) obtained its interest in the Mandala Mining Permit, and in 2002initiated a bulk sampling program on the Mandala gravels, on sections Mandala II and III.Bulk sample pits were sited in the higher grade areas identified by Star Guinée. As withStar Guinée, gravel was treated by a simple, and insecure, jig plant with hand recovery.Over the period 2002 to 2005, SearchGold processed some 18,000m 3 of gravel at a meangrade of 0.37 ct/m 3 to recover 24,542 diamonds (at a cut-off size of 1.5mm) weighing6,571.10ct. with a mean value of US$53.42/ct. In general, the grades found by SearchGoldwere, where comparable, lower than those of Star Guinée. This discrepancy is suspected tobe due to poor security and/or inefficiencies in the SearchGold plant.Overburden, which averages 4.5m in thickness, was removed in two stages, exposinggravelly sand which immediately overlies the gravel. Sutherland, 2004 noted that thispoorly diamondiferous sand was generally mined together with the gravel. About 15 to30cms of the decomposed bedrock was also taken, as this can be penetrated by diamondsand other heavy minerals. Both Star Guinée and SearchGold noted that the largestdiamonds were generally at the base of the gravel (Villeneuve 2000, Walker 2004). Theaverage gravel thickness, including a 20cm slice of bedrock, was 0.7m., SearchGold foundthat their actual average mined thickness was 1m. (Walker 2004).The volume mined was determined by counting the number of excavator buckets filled.Sutherland (2004) notes that this tends to produce a bias towards over-estimating volumesextracted, because although the bucket may sometimes be under-filled, it will never beover-filled to the same amount and this would lead to understatement of the grades.The area of the pits was measured at their base, and a comparison of the pit areas andvolumes extracted, together with the drilling results from Star Guinée, led Sutherland tosuggest that SearchGold was taking too much hanging wall waste with the gravel. However,both Sutherland and Walker (2004) concede that it is difficult to precisely control miningof this nature when large excavators are used. The gravels are below the water table, sopumping was required to keep the excavations dry (McGeorge & Sobie, 2007).In August 2004, SearchGold commissioned a pre-feasibility study report to be used inraising development and working capital to expand the operations at Mandala. Using theStar Guinea estimates and the SearchGold bulk sampling results, a revised estimate of thediamond resources within the Mandala permit was made as shown in Table 7 below.(P.Walker, 2004).Table 7: Mandala Project – Historical Walker Resource EstimateResourceSurface Area Average Grade EstimateGrid (sq.m.) (cts./sq.m.) (carats)Mandala II 226,231 0.25 56,558Mandala III 380,523 0.39 148,404Mandala IV (22%) 142,000 0.86 122,120N’Kéléyani 408,000 0.51 208,080Totals 1,157,000 535,000In May 2005, the SearchGold bulk sampling operation was closed down due to a lack ofworking capital.SearchGold did not bulk sample the N’Kéléyani River section, but the Star Guinée pitsampling there is encouraging and presented in Map 14 above.5.1.4 Historical Exploration of the Ouria Alluvial Exploration LicenceStar Guinée collected 18 widely spaced samples from the Ouria and its tributaries,including the Oubakari which drains a considerable strike length of the Bouro North dyke;it recovered 75 stones weighing 13.46cts from 10 of these samples (Sutherland, 1989).114

5.1.5 Historical Exploration of the Bouro KimberlitesStar Guinée processed samples from the Bouro North and the Mandala Bend dyke zones.Five samples from the Bouro North dyke resulted in grades varying between 0.2 to 7.2ct/m 3and four samples from Mandala bend dykes resulted in grades between 0 and 0.3ct/m 3(Sutherland, 1993).Between 1994 and 2003, De Beers explored all of the Man Craton in Guinea for kimberlitesthrough its locally registered company, DEBSAM. Its exploration results led it to take outtwo prospecting licenses over the Bouro dykes covering 136km 2 .De Beers undertook an investigation of the Bouro dykes which included:• 100m line spaced airborne magnetic survey,• A reconnaissance stream sampling program to obtain Kimberlite IndicatorMinerals (“KIM’s”),• 1Km square loam grid sampling for KIM’s,• Mineral chemistry data for all of the 1000’s of recovered KIM’s,• Helicopter-borne EM survey on 100m line spacing,• 3 x blocks of ground EM using the max-min method,• Heavy mineral assessment of the four Bouro kimberlite dykes,• Petrographic study of the four Bouro dykes,• Microdiamond analysis of the four dykes,• RC drilling of selected EM anomalies and of the dykes,• Digital Terrain modelling, digital maps of rivers, roads, villages and other infrastructure.Map 14: Bouro Project – Debsam’s Loam Sampling and Results115

Debsam’s work showed that although the Bouro North dyke can be traced for 5km alongstrike, there is a further extension some 4km to the west of the mapped dyke location. TheBouro North dyke varies in width between 30cm and 2m and has been mined by artisanminers up to 18m depth. The artisans have told Stellar’s management that they experiencedhigh grades and stones up to 15ct in size, with a high proportion of near-gem and gemstones, when they have mined this dyke.Samples of the Bouro North dyke weighing a total of 1.92tonnes were analysed formicrodiamonds, with 4,635 diamonds weighing 10.44cts being recovered. De Beersreportedly calculated expected grades of 500cpht to 600cpht for this dyke. These are veryhigh grades, possibly amongst the highest grades known in the world. Microdiamondresults from the remaining three dykes were disappointing, with the exception of a singlesample from the Bouro Extreme North dyke where a 200kg sample yielded 435 diamondsweighing 1.22cts.De Beers sold its data to Mano because it did not consider kimberlite dyke mining to bepart of its core business.Debsam conducted a short program of Reverse Circulation (“RC”) drilling of variousgeophysical anomalies in and around the Bouro Dyke zones. This included a number ofintersections at various points along the Bouro North dyke (NKS Consulting, 2003a).From the De Beers microdiamond sampling, the Bouro Extreme North Dykes are ofeconomic interest, and may give rise to alluvial deposits. No data is available for theMandala Bend dykes, but positive alluvial diamond results from sampling conducted thereby Star Guinée suggest that they are also diamond bearing (McGeorge & Sobie, 2007).It is evident from variations in indicator mineral chemistries that there are as yetundiscovered kimberlites within the Mandala drainage basin. The diamonds in theN’Kéléyani drainage are not derived from the Bouro North Dykes, as was once thought,because the composition of the associated ilmenite is distinctly different (Sutherland, 1993).There may also be more dykes near Bouro, close to the old Soguinex mine, which cross theMandala close to the junction of areas Mandala IV and Mandala V (Sutherland, 1989).Figure 2: Bouro Project – Total Garnet Chemistry116

Table 8: Bouro Project – Debsam Microdiamond ResultsSieve Class Bouro North Bouro Extreme North Bouro Central Bouro South(mm sq Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Diamonds Diamondsmesh) No. Weight (cts) No. Weight (cts) No. Weight (cts) No. Weight (cts)2.0 56 3.8036125 7 0.5048225 0 0 0 01.0 150 2.5824260 16 0.2933995 3 0.0550290 5 0.08439000.5 379 2.1359370 47 0.2576270 1 0.0053840 4 0.02131350.3 666 1.2071495 79 0.1450245 3 0.0062305 13 0.02683350.212 824 0.4857965 107 0.0640685 10 0.0057800 32 0.01863300.150 934 0.1760155 110 0.0212700 12 0.0020915 42 0.00734800.104 842 0.0511585 88 0.0052790 5 0.0003320 51 0.00314350.074 611 0.0116660 28 0.0006140 3 0.0000460 15 0.0003410-0.074 179 0.0011280 8 0.0000540 1 0.0000010 2 0.0000180Totals 4,641 10.4548915 490 1.2921590 38 0.0748940 164 0.1620205Totalweightprocessed 1,920 Kg 620 Kg 627 Kg 560 KgNo. Samples 11 3 3 35.2 WAD’s Bomboko Alluvial Diamond ProjectThe Bomboko alluvial diamond project area straddles the Bomboko River and lies in theKérouané District, province of Guinée Forestiére, approximately 75km east-south-east of themajor town of Kissidougou, and some 75Km from Stellar’s Mandala Camp.AccessibilityThe project is accessed via the main N2 tarred road from the capital, Conakry, to Kissidougou, adistance of some 500Km which takes some 10 hours to travel. The project is reached viasecondary roads which are poor in places particularly after the rainy season. The project can alsobe reached from the Mandala project camp by some 75Km of reasonable secondary gravel roadswhich takes some 4 hours to travel, but which will be improved after the merger.ClimateThe reader is referred to discussion of climate under section 5.1. on page 107 above.VegetationThe vegetation varies between densely wooded river courses and grassland on the plateaus. Mostof the surface area can be reached by foot although the grass may reach in excess of 2m heightafter the rainy season.Local Resources & InfrastructureAlthough the general area is rural and under-developed, the District has a long history of miningactivities and there is an adequate supply of well-trained local personnel to provide the requiredskills and labour for mining and for metallurgical processing activities. Unskilled andsemi-skilled labour is plentiful, and is drawn from the local communities. Skilled equipmentoperators and mechanics are readily available in the greater mining District.Access to spare parts, engineering services and other specialized services is reasonably good andcan either be sourced in Kissidougou, Banankoro or Kérouané or obtained by airfreight fromConakry. Diesel fuel is trucked in by tanker on a regular basis from an agent in Banankoro.At Bomboko the camp-site has adequate accommodation for company officials and visitors in6 large bedrooms, 3 bathrooms, and a central kitchen with adjacent dining area. Additional roomsand ablutions are planned. Domestic electricity is supplied by a 25 KVA diesel-powered generatorand domestic water is pumped from a well.Skilled staff and security staff are housed on site in brick and plaster housing, while unskilledlabour all live in the local villages.117

PhysiographyThe Soumbaya area lies within the headwaters of the River Bomboko immediately north of thewatershed dividing the NE flowing Niger tributaries and the SSW flowing rivers that drain intothe Atlantic Ocean. The area is hilly to the north, west and south but gradually opens to the eastor the downstream portion of the valley where the Bomboko joins the major River Baoulé nearthe town of Banankoro. The project area lies at an altitude of between 700m and 1,000m abovesea level (Elford and Acheson, 2006).Local Geology, History of Exploration & Results SummaryWithin the Soumbaya area, basement rocks consist of predominantly Archaen aged granite gneisswith granulitic and amphibolitic gneiss probably derived from volcano-sedimentary rocks, withferruginous quartzite and schist units (Elford and Acheson, 2006).South of the concessions, dolerite dykes and sills intrude the Archaen ferruginous quartzites andare thought to be of Palaeozoic age (Sutherland, 2005); to the north and west, large Proterozoicaged, microcline-rich, granite intrusions outcrop as bare hills.Kimberlite intrusions in the immediate area are not well documented but one occurrence has beenreported on the north bank of the Bomboko some 2km downstream of Soumbaya (Elford andAcheson, 2006). Two kimberlite dykes are also reported within the southern Bomboko, east ofSouloukoudou village (Sutherland, 2005). Multiple kimberlite occurrences are mapped to the southof the concession area west and SW of Baradou village in the Ouaou and Dofi rivers. Both dykesand pipes up to 3.5ha in 24 separate occurrences have been reported and are estimated to be ofJurassic age (153Ma) (Skinner et al, 2005) which significantly post-dates the dolerite intrusions.Deep weathering of the granite gneiss basement in the river valley has resulted in thick claysforming the alluvial bedrock (Elford and Acheson, 2006).5.2.1 Historical Exploration of the Bomboko Alluvial DepositSoguinex, a subsidiary of African Selection Trust, were the first explorers to work in theBomboko area and are reported to have outlined a resource of some 13,000cts in theBomboko downstream of Soumbaya at a grade of 0.81cts/m 3 . This has been mined out.In the early 1950’s a French company, Berger, worked in the area and mined some 2,750ctsfrom the Bassan stream, a north bank tributary of the Bomboko.Soviet prospectors worked in the area during the 1960’s and defined a resource of some9,900cts at 0.16cts/m 3 adjacent to the Soguinex diggings and also reported the discovery ofa kimberlite in one of the prospect pits.In the 1980’s Aredor systematically sampled the entire flood plain and lower terraces ofthe Bomboko River; reportedly using a clam-shell Poclain excavator to dig pits andsample the basal gravels.During 1997 and 1998, AA Mining explored downstream from the WAD concession area.Prospecting pits were excavated along lines spaced between 150 and 350m apart. Positivepits were followed up by bulk sampling trenches.In addition to historical exploration and commercial exploitation, the area has been minedby artisan miners and their excavations dot the landscape (Elford and Acheson, 2006).5.3 Stellar and WAD’s Droujba Kimberlite & Alluvial diamond ProjectThe various licences are centred on the Droujba kimberlite pipe in SE Guinea near the town ofBounoudou some 48km east of the regional centre of Macenta.AccessibilityThe primary access route to the area is from the south, branching off the Macenta to N’Zérékorétarred road at Seredou village, some 820km from Conakry. A gravel track winds through Kuankanto Bounoudou village and is often impassable during the rainy season. It is also possible to accessthe area from the north via gravel tracks from Kerouané to Beyla via Korela (Sutherland, 2007).118

ClimateThe climate is described as seasonal wet-dry humid tropics. The Diani valley, within which thelicences fall, is bounded by the Ziama mountain range to the west and has an average annualrainfall of some 2,200mm. There is little wind throughout the year, but temperatures and humidityremain high, with maximum rainfall in August (425mm) and minimum in January (10mm). Thelocal rivers flow throughout the year, with the Diani peak flow in September and minimum inMarch – a lag due to recharge/discharge of groundwater (Sutherland, op cit.).VegetationIn the Diani valley around Bounoudou the vegetation is typically open grassland with dense treecover in the form of gallery forest along stream courses or steep slopes. To the south of theconcession area there is a rapid transition to dense rain forest which also covers the ZiamaMountains to the west of the valley.Local Resources & InfrastructureAlthough the general area is rural and under-developed, the district has a long history of bothcommercial and artisan mining activities and there should be an adequate supply of well-trainedlocal personnel to provide the required skills and labour for mining and for metallurgicalprocessing activities. Unskilled and semi-skilled labour is plentiful, and is drawn from the localcommunities. Skilled equipment operators and mechanics are readily available in the greaterSE Guinea mining district.Access to spare parts, engineering services and other specialized services is reasonably good andcan either be sourced in N’Zérékoré or Kérouané or obtained by road from Conakry. Diesel fuelcould be trucked in by tanker on a regular basis from the fuel depot in N’Zérékoré.There is currently no permanent camp at Droujba.PhysiographyThe Droujba concession areas lie within the valley of the Diani River, a large N-S flowing riverdraining into the Atlantic Ocean through Liberia. The valley is defined by steep escarpments tothe west, north and irregularly to the east. The Ziama Mountain range to the west rises to peaksof over 1,300m and merges with a dissected upland plateau to the north which lies at an altitudeof 800m to 950m.Within the Diani valley, interfluves are flat with occasional isolated hills rising to 550m abovemean sea level. The eastern margin of the valley is less well defined by the southern end of theChaîne Simandou with hills reaching 800m altitude. The drainage pattern is complex andsuggests recent rapid incision of the Diani stream course (Sutherland, 2007).Local Geology, History of Exploration & Results SummaryThe basement rocks of the Diani valley are dominantly Archaen aged (>2,500 Ma) granitoid rocksconsisting of migmatitic granites, granite gneiss of several varieties and occasional rare quartziteunits. Small lenses of amphibolite and crystalline schist occur within the basement rocks withpredominantly E-W foliation and near-vertical dips.Radiometric aging suggests ages of between 2,800 and 2,900Ma (Goujou et al, 1999 cited inSutherland op cit.).East of the Diani valley, but also occurring in scattered small outcrops within and west of thevalley, younger Precambrian (>550Ma) supracrustal metamorphic rocks occur overlying thebasement rocks. These are best developed in the Chaîne Simandou where quartzites, schists andbanded ironstones (Itabirites) occur.Dolerite intrusives in the form of dykes, inclined sheets and sills intrude the basement andsupracrustal rocks and are of various ages from Proterozoic (600Ma) to Jurassic (150Ma).119

Kimberlite intrusions are also common in SE Guinea, most frequently dykes although over25 pipes are known with the largest being 6 ha. And usually have low diamond grades of

“The kimberlite has an amicroclastic texture (cristalloclastic) and is carbonised. It shows aBreccia Tuff facies. Minerals constitute 60 per cent. to 70 per cent. of the rock, host rockxenoliths 10 per cent. to 20 per cent. and the ground mass consists of carbonate andserpentine. Xenoliths present a wide variety of shapes, sizes and types, but magmatic typesare the most common. Amphibolite, granite and gneiss are less frequent. Minerals(essentially serpentinised olivine; less frequently ilmenite; pyrope and phlogopite are rare)are 1mm to 2.3cm in size, averaging 0.5cm. Accessory minerals are zircon, spinel andchromite. Most of the pyrope grains have a brown keliphytic coating. Uncoated pyropesand ilmenites are usually mat.Sampling has yielded good values ranging from 1.5 to 5.84 ct/m 3 , depending on the trench.In drilled samples, the grade varies from 0.363 to 3.55 ct/m 3 ”.The Soviet Aid Mission processed some 656m 3 (1,640 tonnes) of kimberlite from trenchesand drill core samples using a bottom screen size of 0.5mm and recovered 6,712 diamondsweighing 778.42cts. which translates to a grade of 80.08cpht.(Sutherland, 2007).The ADG Exploration ProgramA joint venture was formed between New York diamond trading companies, Harry WinstonInc. and Diamond Distributors Exploration that targeted the alluvial deposits along theDiani River during late 1978 to 1981. An augur drill and Poclain excavator were used on asurveyed grid to define resources, resulting in a 2 million carat estimate for that section ofthe Diani. Diamond grades averaged 0.31cts/m 3 within the grid area with several high gradesections, the highest recorded being 15cts/m 3 .The diamonds recovered were generally low quality, but with a small population of highquality diamonds also present. The average US$10/ct value excluded these higher qualitystones; a feasibility study based on this very conservative average diamond value showedthe project to be uneconomic and the project was abandoned.The Projet du Developpement Minier (SIDAM-MINOREX)Between October 1988 and May 1989 a French consultancy, Sidam-Minorex, surveyed thearea to determine remaining and new resources in the Bounoudou District for Government.Their work outlined some new upper terrace gravels along the Diani and found diamondsoccurring in the Somolo River near Famoëla.The Hymex ProjectIn 1988 a Swiss-financed diamond exploration company obtained an explorationconcession along the Diani River. Drilling and drag-line trenches across parts of thealluvial deposit established a resource of some 350,000cts at an average grade of 0.2ct/m 3along the lower Avili River and over 1.5million cts at between 0.3 and 0.4cts/m 2 (N.B. Arealrather than volume grade). In 1995, Hymex listed as Hymex Diamond Corporation on theVancouver and Nasdaq exchanges claiming reserves of 4 million cts and resources of10 million cts.Hymex D.C. began trial mining in the Diani-Avili confluence area and produced some61,244cts between 1995 and their demise in 1998 (Sutherland, op cit.).6. Overview of the Sierra Leone Diamond Projects6.1 Stellar’s Kono Kimberlite ProjectThe Kono Project consists of two contiguous licences covering the western part of the historicalKoidu diamond Mining District. The Exploration Licences EXPL’s 3/05 (Njaiama) and 4/05(Yengema) extend over the south-western strike extension of the Koidu kimberlite dykes.121

AccessibilityThe nearest town to the project, Koidu, is some 250km. due east of the capital, Freetown, fromwhich it can be reached by a reasonable all-weather road, part macadamized, part laterite gravel.The project camp and plant site is located at Ngaya village, some 7km from the diamond miningtown of Koidu and is also reached by means of reasonable laterite gravel roads.ClimateThe climate is tropical with high temperatures, humidity and heavy rainfall. The meantemperature is about 27 ° C on the coast and almost as high on the eastern plateau. There are twodistinct seasons: the dry season, from November to April, and the wet season, over the rest of theyear, with the heaviest precipitation in July, August, and September. Rainfall is greatest along thecoast, especially in the mountains, where there is more than 5,800mm annually, but it averagessome 3,150mm a year in most of the country, with 3,660mm in Freetown. The relative humidityranges from an average of 80 per cent. during the wet season to about 50 per cent. during the dryseason. (www.nationsencylopedia.com).VegetationSierra Leone has four physical regions: the coastal swamp; the Sierra Leone Peninsula, withthickly wooded mountains that rise from the swamps; the interior plains, consisting of grasslandsand rolling wooded country; and the interior plateau and mountain regions. In lower altitude areasthe vegetation is tropical rain forest, but this thins quite rapidly on higher ground. The Konolicences are some 400m above sea level and dissected with well developed dendritic drainagesystems between small hills of resistant granite.(www.brittanica.com, Sobie & McGeorge, 2008)Local Resources and InfrastructureThe infrastructure of the country was badly damaged by 11 years of civil war which ended in 2002and is still in a bad general condition with rare or no public water or electricity supplies, poorlymaintained roads and railways which no longer function at all. Fixed line telephone services areonly available in Freetown although cellular telephone and associated broadband data coverage isreasonably widespread and dependable. (Sobie & McGeorge, 2008)Artisan and commercial diamond mining in the Koidu District has been on-going since discoveryby the British Geological Survey in 1930 and there is a reasonable pool of skilled and unskilledlabour in the district. Basic mechanical and electrical repair facilities in Koidu are availablealthough spare parts must be sourced from Freetown. Diesel fuel is sourced by tanker roadtransport from Freetown.PhysiographyThe Kono area lies to the south-west of the Tingi mountain range and is in the headwaters ofseveral rivers that flow south-westward towards the Atlantic Ocean.Local Geology, History of Exploration & Results SummaryThe properties are in Leonean granite-greenstone terrain. The topography is dominated by steep,rocky granite hills or tors and the structural control of drainage development is very evident.Remnant mafic schist and metasediments are found within the granite gneiss.6.1.1 Historical Exploration and Exploitation ResultsThe mining sector in Sierra Leone is dominated by diamond mining which is also one ofthe largest generators of foreign exchange in the economy.The British Geological Survey found alluvial diamonds in the Koidu area in 1930 and aBritish company, Selection Trust – operating as Sierra Leone Selection Trust (“SLST”),began commercial exploitation of alluvial diamond deposits along the Moinde and otherrivers with gravels transported to a central processing plant at the town of Yengema. SLSTdiscovered the small Koidu 1 & 2 kimberlite pipes in 1948 and mined the shallowweathered zone over these pipes and the intervening Dyke-A system (P.K.Hall, 1969).122

SLST was partially nationalized in 1965 and fully nationalized in 1985 by the NationalDiamond Mining Company (“NDMC”) which then fell to rebels of the RevolutionaryUnited Front in 1997 when commercial diamond mining ceased.In 2002 following the end of the civil war, Koidu Holdings Ltd. (“KDH”) obtained themining rights over a portion of the old NDMC licences and began opencast mining of theKoidu 1 & 2 pipes. In 2004 KDH exported 79,000cts worth US$13.8 million and in 2005this increased to some 100,000cts worth US$22.5 million at average prices of US$230/ct.The latest available production figures for 2006 were 112,902cts at an average value ofUS$233/ct (Sobie & McGeorge, 2008).In 1998 Mano River Resources, the parent of Stellar, obtained the two licences whichconstitute the Kono Project and are adjacent to the west of the KDH mining licence.There are extensive illegal artisanal mining activities in the mining district which ispoorly regulated.Sierra Leone is well known for its large and high value diamonds with the third largestdiamond ever recovered, the Star of Sierra Leone, weighing 969.8cts discovered in Kono inFebruary 1972.Diamond production in Sierra Leone reached a peak of 2 million carats in 1970 and hasdeclined since. Official diamond exports for 2006 were 603,566ct (US$125.3 million) withan average value of US$207.61/ct. In 2007 exports declined to 448,925cts and continuedto decline in 2008 to 371,285cts. Since there is considerable smuggling of illicit diamondsinto neighbouring countries, it is certain that these production statistics underestimate theactual production.Historical production is difficult to quantify due to poor record keeping but total historicalproduction from Sierra Leone is officially said to be 50 million carats and the trueproduction is probably double that figure. (Sobie & McGeorge, 2008).Due to the civil war and destruction of many records, the detailed results of previousSelection Trust/National Diamond Mining exploration and exploitation of the Kono licencearea is essentially unknown. (Sobie & McGeorge, op cit).6.2 Stellar’s Tongo Kimberlite ProjectThe Tongo property is approximately 45km south of the Kono licences and there is a fair allweather road that connects them. Since the projects are within the same Koidu District the samecomments relating to Accessibility, Climate, etc. as discussed above for Kono apply here. (Sobie& McGeorge, 2008).Local Geology, History of Exploration & Results SummaryThe Tongo District was the second alluvial diamond mining area in Sierra Leone to be mined bythe SLST (P.K.Hall, 1969) and subsequently NDMC; SLST found the kimberlite dykes therein 1954.SLST bulk sampled the dykes in 1964 and 1965. NDMC bulk sampled the Lando dykes andderived a mining grade of between 87 and 114cpht. The dyke kimberlites of the Tongo Districtare classified as spinel and ilmenite rich hypabyssal kimberlite. Table 9 below summarises thehistorical results from the district.Since discovery in the 1960’s there has been extensive and continuous artisan mining activityalong the dykes.Stellar’s Tongo licence area (see Map 15 below) lies on the eastern extension of thediamondiferous Tongo kimberlite dykes, with Koidu Holdings to the west where they have bulksampled 1,000 tonnes from the dykes yielding grades between 196 and 288cpht. The diamondvalues in April 2008 were believed to be in excess of US$175/ct. (Sobie & McGeorge, 2008).123

Table 9: Tongo Project – Historical Bulk Sampling ResultsWidth Depth Grade ValueDyke Name Company Comments (m) (m) Tonnes Carats cpht $/ctLando SLST 1964 0.34 Not Not Not 357trenches known known knownLando SLST 1965 0.33 0-10.5 1,586 5,739 362Bulk 1,708 3,339 195sample 236 388 164Lando NDMC Not Not Not Not 200-300known known known knownLandoA Koidu 2005 Not Not 611 1,197 196 163Holdings Bulk known knownSampleLandoB Koidu 2006 Not Not 1,671 4,812 288 192Holdings Bulk known knownSampleKundu SLST 0.30 Not Not Not 150known known knownKundu Koidu Bulk Not Not Not Not 246 202Holdings Sample known known known knownTongo SLST Two Not Not Not Not 12trenches known known known knownPeyima SLST Not Not Not Not 87known known known knownPanguma Geo. 1960 0.45 Not Not Not 50Survey known known knownPanguma River 2006 Not Not 12.51 6.72 54Diamonds 12.5 known knowntonnesMap 15: Tongo Project – Stellar Tongo and Adjoining Licences124

6.3 WAD’s Former Mining Licence ML 1/2004The Dump 11 project is located immediately east of the Koidu Holdings Pipe 1 & 2 kimberlitemines. The same comments relating to Accessibility, Climate, etc. as discussed above for Konoapply here. (Elford & Acheson, 2008).Local Geology, History of Exploration & Results SummaryGranites, gneisses and supracrustal rocks of Archean age (2,600Ma) predominate. Amphibolitesand schists are also present and often associated with hydrothermally derived gold and sulphidemineralization. The rocks are extensively fractured and this pattern of fracturing controls thedrainage pattern.The kimberlite dykes in the Kono District trend at 065 ° to 070 ° and are steeply dipping to verticalwith an emplacement age of 140Ma. (Elford & Atcheson, 2006)ML 1/2004 was granted in March 2004 for a period of 8 years. African Diamonds acquired a60 per cent. interest in the licence, with the remaining 40 per cent. being held by the local KamaraChiefdom. (Elford & Atcheson, op.cit.)The dump is an accumulation of -1.5mm undersize material derived from SLST & NDMCprocessing at Plant 11 between 1969 and 1992 of alluvial gravel derived from mining depositsalong the Meya, Woyie and Moinde rivers within the Yengema lease. The bulk sampling of theKoidu 1 and 2 kimberlite pipes was also treated in this plant and some 1 million tonnes ofkimberlite was processed here. The dump was originally estimated to contain between 6 and7 million tonnes of material.No historical, systematic sampling of the dump had been carried out before the grant of theMining Lease to African Diamonds and partner. Artisan miners have been re-treating this dumpmaterial for a number of years and it is estimated that a minimum 4 million tonnes remains.(Elford & Acheson, op cit.)6.4 WAD’s Former EXPL 8/2002 – Pipe 3 ProjectThe Pipe 3 project is located adjacent to and along strike to the east of Koidu Holdings’ Pipes 1 &2 kimberlite mine. The same comments relating to Accessibility, Climate, etc. as discussed above forKono apply here. (Elford & Acheson, 2008).Local Geology, History of Exploration & Results SummaryThe local geology is the same as that described in paragraph 6.3 above.Pipe 3, which lies within EXPL 8/2002, is the smallest of the three known kimberlite pipes in theKoidu diamond district, and is the most easterly of the three pipes that all lie on a north-easterlytrending lineament.The pipe, along with associated dykes, was discovered in the 1960’s as a result of a trenchingprogram. In 1973, trenching, augur drilling and pitting defined the limits and shape of the pipe.The pipe is roughly elliptical with the narrowest south-westerly portion thinning rapidly tobecome Dyke Zone 0. The surface area of kimberlite has been measured as 2,200m 2 (0.22ha.).Two diamond drill core holes were used to determine the shape and size of the pipe at depth. Theresults are summarized as follows:Hole P3/3 was sited to the north of the pipe and inclined -72 ° to the south-east so as to intersect thewidest part of the pipe and was stopped at a depth of 257m without intersecting any kimberlite.Hole P3/4 was sited closer to the pipe contact and was inclined at -65 ° to the south-east with anend-of-hole depth of 116m. Kimberlite was intersected between 37 and 96m. The core wasdescribed as being fresh porphyritic kimberlite with granite and dolerite inclusions. It was thoughtthat the pipe has a horizontal width of 21m at the 91m below surface level; this means that the pipeeither narrows rapidly with depth or plunges steeply to the east or south-east.125

The results of any historical treatment of kimberlite samples and estimated grades are notknown.(Elford & Acheson, 2006).7. Current Exploration on the Guinea PropertiesThe recent exploration and development of the various projects in Guinea is described in this section.7.1 Stellar’s Mandala Alluvial Mining ProjectIntroductionIn 2005 the previous operator of this semi-industrial mining licence, SearchGold ceased bulksampling activities and sold most of its plant and equipment due to a lack of working capital.SearchGold then transferred its rights in the Mandala and Ouria licences to Stellar in exchangefor 2.7 million Stellar shares.Since 2005, Stellar has:• Obtained, through a wholly owned Guinean subsidiary company, Societé RessourcesMandala Guinée SARL (“RMG”), a 100 per cent. ownership of the semi-industrial miningrights in the licence area,• Commissioned a topographic survey of the Mandala mining area, with emphasis onrecovering the original Star Guinea grid markers, the location of old workings, roads andother physical features,• Purchased a set of IKONOS satellite images to assist in the mapping process,• Commissioned a GIS study to use the original Star Guinea grid exploration results and tothen sub-divide the mining area into mining blocks of 1Ha each and to estimate from theStar Guinea results what the volume of overburden, volume of diamondiferous gravel anddiamond grade would be in each of the mining blocks,• Purchased, transported to site, erected and commissioned a 100-tonne per hourDMS diamond treatment plant complete with a modern final recovery section,• Purchased and transported to site earthmoving equipment and haul trucks to begin the bulksampling/trial mining,• Repaired and rebuilt sections of the Macenta to Bouro gravel road in order to transport theplant and equipment to site and to obtain regular deliveries of consumables, principallydiesel fuel,• After commissioning the plant on 20 April 2009, commenced the bulk sampling/trialmining principally in the southern mining blocks.Mining Blocks (An extract from Walker & Martinez, 2008 Mine Blocks Report)Exploration data generated by Star Guinea’s drilling and sampling campaign between 1988 and1989 in the Mandala and N’Keleyani alluvial flood plains has been combined with a moderntopographical survey using ArcView GIS to generate various maps and mining blocks so as tobetter plan the successful alluvial mining of these flood plains.Appendix B (13 pages) lists the estimated volumes and tonnages of overburden and gravel to bemined in each block and an estimator of the number of carats to be produced from each block.These estimates are calculated using the following treatment of the Star Guinea dataset:(a)The overburden thickness for the block is estimated from the Sutherland drill data and theoverburden thickness contour maps, and is adjusted by subtracting the 0.25m thickness ofoverburden which will be included in the gravel thickness estimator to form a dilutedmining volume, tonnage and grade. An estimated Specific Gravity of 2.0 is applied toconvert in situ volume to tonnes.126

(b)The gravel thickness for each block is estimated from the Sutherland drilling data and thegravel thickness contour map adjusted by the addition of 0.5m of material (0.25m ofoverburden plus 0.25m of bedrock) providing a fully diluted in situ volume of gravel to bemined from each block. An estimated S.G. of 2.0 is applied to convert this estimatedvolume to tonnes.(c)The estimate of carats to be produced from each block is calculated from the SutherlandPoclain sampling data, and where this is lacking, by estimating from the grade distributionmaps. Please note that the carats per cu.m. grade figures are calculated using the weight ofdiamonds recovered in the sample divided by the volume of the sample, which is assumedto be the surface area of the Poclain hole (1.72m) multiplied by the actual gravel thicknessplus 0.5m of assumed dilution. Please note that these estimates may be very inaccurate dueto the small sampling volumes obtained from the Poclain excavator.Please note that a fairly large area (8 to 10ha.) lying between the Mandala 3 and Mandala 4 grids –and just south of the confluence of the Mandala and N’Keleyani streams is essentially unexploredground and is not included in this study. Sutherland, in a personal communication explained that hedid try to drill and sample here, but the large number of boulders in the overburden and gravels didnot allow them to sample properly so that this section was not explored. By first principals, this areashould yield high grades considering:(a)(b)that the boulder deposition represents a sudden drop in carrying capacity of the streams andtherefore a good depositional environment for diamonds and the boulder deposits formgood trap sites for diamonds.the stream is forced through a narrow part of the valley with granite hills to east and west; highvelocity through the “narrows” would have been followed by a sudden drop in velocity at theexit from the constriction and here one would expect the deposition of larger diamonds andhigher grades.127

Maps 16, 17 and 18 below show the mining blocks superimposed on the grade contour maps.Map 16: Mandala Project – Northern Mining 1 to 287128

129Map 17: Mandala Project – N’Keleyani Mining Blocks 1 to 314

Map 18: Mandala Project – Southern Mining Blocks 1 to 307The mining block exercise (see Appendix B, 13 pages) concluded that from the available evidencethere was a total of 3,358,993 tonnes of gravel (fully diluted) containing 643,579cts., whichmeans a weighted average global grade of 19.16cpht. The following cautionary remarks weremade in relation to this estimate:Many of the blocks extend well beyond the Star Guinea sampling grid and both volume and gradeestimates are derived from distant data points.There is little knowledge of actual volumes mined by either SearchGold or artisan miners andonly very rough adjustments can be made for blocks affected by artisan mining.130

The original Star Guinea data was obtained from very small Poclain pits and both gravelthickness and grade data and all the estimates derived from that data should be treatedwith caution.Bulk SamplingBulk Sampling is now being conducted over the alluvial deposit following the successfulcommissioning of the plant on 20 April 2009. The plant has a name plate head feed rate of100 tonnes per hour and a DMS capacity of 30 tonnes per hour. There is automatic density controlon the DMS cyclones. Diamond recovery is by Flowsort X-Ray with a grease table back-up, allperformed under strict security conditions. The bottom screen is a 1.4mm slotted Hi-Flow screenwith an effective opening of 1.7mm capable of recovering diamonds >0.053cts. DMS concentrateis passed twice through the Flowsort machine and grease table and then hand jigged and sorted;to date very few and only very small diamonds have been recovered from the final hand-sortprocess. It can be concluded that the plant is very efficient and a very high percentage recoveryis being achieved.The bulk sampling mining cuts are 13-15m wide, being the maximum swing of the excavator andoverburden is removed in two benches, each some 3m thick. The long-wall is advanced bybackfilling into the previous mined-out slot (see photograph below) thus facilitating rehabilitationof the site. When mining gravels, very strict grade control is exercised in the cut to minimizedilution of the ore.131

Table 10: Mandala Project – Reconciliation of Grades, Volumes and Carats Producedfor period 3 April to 26 November 2009EST. VolumeRecovered EST. Grade EST. Actual Remaining DiamondsBlock Grade Grade Variance Block Vol. Mined in Block (m 3 ) Produced (cts.)No. Map Cts/m 3 Cts/m 3 % (m 3 ) (m 3 ) Calc. Visual* Actual Estimated Variance %8/9 S 0.42 0.5 84 11,000 1,515 9,485 8,000 634.95 757.5 83.816 S 0.62 0.4 155 10,000 8,156 1,844 2,000 5015.96 3262.4 153.7517 S 0.63 0.5 126.9 10,000 1,038 8,962 9,000 658.98 519.0 126.9760 S 0.64 2.0 32 2,625 550 2,125 2,000 352.51 1100 32.0577 S 1.00 0.50 200 12,000 2,521 9,479 9,000 2531.46 1260.4 200.978 S 0.50 0.20 250 2,000 561 1,500 9,000 280.43 112.12 250.187 S 1.005 0.45 223.4 6,500 4,719 1,781 5,000 4744.84 2123.37 223.4697 S 0.998 0.70 142.5 10,000 5,235 4,765 4,000 5223.66 3664.5 142.5598 S 1.338 0.08 1,673 3,378 747 2,631 2,500 999.91 59.76 1673.2107 S 0.807 0.36 224.2 10,000 9,158 842 1,000 7390.17 3296.88 224.15108 S 0.95 0.25 380.1 3,750 5,665 nil 1,000 3563.08 1416.25 251.59117 S 0.668 0.23 290.4 4,500 3,379 1,121 4,000 2258.58 772.22 292.5118 S 0.847 0.23 368.3 1 7,211 nil 2,500 6108.8 1658.39 368.4128 S 0.380 0.40 95 10,125 332 9,793_________9,000_________126.78_________132.88_________95.4Southern Blocks Total_________68,000_________39890.11_________20135.67_________198.11223 N 0.465 1.21 38.4 16,000 548 15,452 15,000 254.72 662.84 38.4224 N 1.02 5.91 17.3 7,500 2,967 4,533_________4,500_________3030.83_________17537.33_________17.3Northern Blocks Total_________ _________19,500_________3,285.55_________18,200.17_________18.05Overall Totals_________54,302––––––––– _________87,500––––––––– _________43,175.66––––––––– _________38,335.84––––––––– _________112.6–––––––––Note:1. S=The Southern Block Map, N=The Northern Block Map.2. Excluded from the total carats produced (43,175.66) are 239.01 cts from a tailings audit, therefore 43,414.7 cts have been produced to 26 November 09.3. Visual* means the remaining volume estimated from a visual examination of the block on the ground.132

Map 19: Mandala Project – Bulk Sample Cuts Mined to 26 Nov 2009133

The proportion of Gem, Industrial and Boart diamonds produced and diamond sales values foreach are summarized in Table 11 below.Table 11: Mandala Project – Sales Summary and InventoryProportionWeight Sales Value of Total (%)Category sold (cts.) (US$/ct) By Weight By ValueGem 2,896 177.54 8.6 50.06Industrial 29,819.3 17.16 89.0 49.81Boart 785.6 1.67 2.34 0.13Total 33,502 30.73in stockEst. Value(31 Oct. 09) US$/ctGem 288.93 267.42 6.3 60.34Industrial 2,574.0 18.75 56.6 37.68Boart 1,681.92 1.50 37.0 1.97Total 4,544.85 28.17Conclusions and RecommendationsThe following conclusions can be drawn from the 5 months of bulk sampling withrecommendations for further work:224,792 diamonds, weighing 43,414.7cts, have been recovered from treating 54,300m 3 of gravelgiving a weighted average grade of 0.80cts/m 3 and with an average stone size of 0.194cts/stone.The average recovered grade of the southern blocks is better than predicted by the block miningmodel (Table 11, above) by a factor of 1.98 times, however the grade of samples in the northernmining blocks is well below that predicted by the model.The increase in actual grade is thought to be the result of several factors, the most important ofwhich is mining grade control – essentially, good management of dilution in the bulk sample pit.Other important factors are better recovery due to an efficient plant and better security – theStellar DMS plant is far more efficient and secure than the jig plants used by previous operatorsStar Guinea and SearchGold to treat their samples.Diamond sales over the period 10 June to 31 October 2009 totaled 33,502cts with gross receipts ofUS$1,029,514, which means an average price of US$30.73/ct was received. Please note that salesare of run-of-mine diamonds and fairly reflect the average value of production in the current weakdiamond market (run of mine sales in 2004/5 were $53/ct). Going forward the diamond market isexpected to improve as the world comes out of recession and sales of luxury goods increases, thiswill impact positively on the prices of rough diamonds (C. Wyndham, 2009 and J. Allan, 2009). Seeremarks in section 9 below regarding the diamond market.It is recommended that Stellar purchase at least one additional 20-tonne ADT and then continuethe bulk sampling program.7.2 Stellar’s Ouria Alluvial Mining ProjectIntroductionStellar, as with its predecessor, SearchGold, has not done any exploration work since the originalStar Guinea period.Exploration Work to DateThe Ouria Licence was only reconnaissance sampled by Star Guinée with 18 samples being takenfrom the Ouria and its tributaries including the Oubakari which drains a considerable strike lengthof the Bouro North dyke. Ten samples yielded a total of 75 diamonds weighing 13.46ct. Thediamonds were on average rather smaller than found in the Mandala, but the quality was similar.134

Samples upstream of the Oubakari tributary confluence contain diamonds, therefore the CentralDykes may also extend westwards to be intersected by the Ouria. The inferred diamond resourceestimated to occur within Stellar’s Ouria permit was approximately 160,000cts. within an area of200,000m 2 (Sutherland 2004).Given that the artisan miners encroached on the Ouria lower terraces, particularly in theOuria/Oubakari confluence area during 2007 when SearchGold stopped active work and Stellarbegan, a small downward adjustment of this inferred resource should be made.Conclusions & RecommendationsIt is recommended that a base line and a grid is established and that mapping of the current artisanactivity be initiated before planning for a drill and pit sampling campaign to establish the extentof the alluvial deposits and their possible grade.7.3 Stellar’s Bouro Kimberlite Dyke ProjectIntroductionSince obtaining the licences and purchasing the Debsam data, Stellar has:• Acquired a set of Ikonos satellite colour images to assist in tracing the dykes,• Mapped the extent of the dykes with the main Bouro North dyke being tracedsemi-continuously for a distance of approximately 5 kilometres in an east-west trend. Otherdykes were mapped primarily on the basis of artisanal diamond diggings, but none seem tobe as extensive as the Bouro North dyke,• Collected seven one tonne mini-bulk samples from the Bouro dykes; The samples wereexcavated by hand from existing artisanal workings,• Submitted the Debsam micro-diamond results for an independent expert opinion as tosuggested grade of the dykes, thus confirming Debsam’s estimates.Macro-diamond sample programAfter assessing the previous Debsam exploration results, Stellar decided to undertake furthersmall scale sampling of the Bouro South, Central, North and Extreme North dykes. Sevensamples weighing approximately 1-tonne each were collected from the kimberlite dykes, washedand jigged on site to recover any diamond greater than the 0.71mm sieve mesh size. Threesamples from the Bouro North and Central Dyke yielded diamonds, the remaining three samplesfrom the South and Extreme North dykes were negative.Please note that the sample weights of 1 tonne refer to wet samples. The grades given are thereforeunderestimates – the true (dry) grades could be higher (McGeorge 2007) by as much as 20 to30 per cent.These samples were washed in the field and the +0.71m fraction retained and jigged to retain theheavy mineral concentrates. Visual inspection of the concentrate was made in the field and anyvisible diamonds were recovered for weighing and describing. The sampling locations are shown inTable 12, below.Table 12: Bouro Project – Mini Bulk Sample LocationsSample Dyke X_Coord Y_Coord No.Diamonds1 Bouro North 465437 975165 292 Bouro North 462919 974703 223 Bouro North 466894 975352 224 Bouro South 463308 967220 05 Bouro South 463446 966466 06 Bouro Central 464840 971316 37 Bouro Extreme North 461541 980766 0135

These seven washed and jigged samples then received further treatment in the Stellar laboratoryin Monrovia, Liberia, by drying, sieving into the +0.3mm, 0.5mm, 0.71m and 1.0mm sizefractions followed by concentration using water elutriation columns and finally subjected tomicroscope examination. Abundant indicator minerals, including pyrope garnet, ilmenite andchromite were recovered from the samples. A further number of diamonds were also collected andthe complete results of the sampling are shown in Table 14 below. A total of 76 diamondsweighing 4.573 carats were recovered. The majority of these diamonds were recovered from thethree samples of the Bouro North dyke, with macrodiamond grades (wet) of up to 182cpht beingcalculated – compare this to Debsam’s calculated macrodiamond grades of 500 to 600cpht.These diamonds were then consigned to Mineral Services in Cape Town for weighing, measuringand describing. The diamonds are virtually all dodecahedron in crystal form, with the exceptionof two octahedral crystals, and four described as fragments. Colours are dominantly brown withsubordinate (34 per cent.) white crystals, and 70 of the 76 (92 per cent.) diamonds are describedas transparent.Table 13: Bouro Project – Stellar’s Mini-Bulk Sampling ResultsSampleWeight Weight CalculatedSample No. Dyke Wet (Kg) No. Diamonds Diamonds (cts) Grade (cpht)1 Bouro North 1,000 29 1.825 182.52 Bouro North 1,000 22 1.38225 138.233 Bouro North 1,000 22 1.24825 124.834 Bouro South 1,000 0 0 05 Bouro South 1,000 0 0 06 Bouro Central 1,000 3 0.11725 11.7257 Bouro Extreme N. 1,000 0 0 0Totals 76 4.57275Micro-Diamond (“md”) AnalysisIn September 2007, the results of the De Beers micro-diamond sampling, obtained using totaldissolution of the samples by Hydrofluoric acid were given to Mr.M.M.Oosterveld, a consultingdiamond statistician. The 20 samples, weighing 3,727kg yielded 5,364 diamonds – 667 of thesediamonds were >0.5mm and classed as Macro-diamonds (see Map 20 below).Oosterveld found that the distribution of the low-grade group samples from the Central, Southand all but one sample from the Extreme North dyke indicated a macro-diamond grade of some16cpht with a micro-grade of 131 stones per tonne (“spt”) for stones larger than 0.104mm (belowthis size, the recovery is incomplete & therefore unreliable).136

Map 20: Bouro Project – Debsam and Stellar SamplingAll but one of the high-grade group of samples are from the North Dyke and analysis indicatesan average macro grade of 544 cpht and micro grade of 1,697 spt. Sample CKO570 from theExtreme North dyke had a macro grade of 610cpht and micro grade of 1,710spt.Oosterveld concluded that Bouro North and the one sample from the Extreme North dykes havevery high micro-diamond content and indicate that macro-diamond grades will be in excess of400cpht and could be in the order of 500cpht or higher. Oosterveld recommends further samplingof these two dykes to confirm these estimates. (Oosterveld M.M., 2007)137

Oosterveld then did further statistical analysis on the Bouro North dyke. He comments thatalthough samples indicate that the dyke will be high grade, there is considerable variationbetween samples and further sampling will be needed to accurately determine where the highgrade and the lower grade sections are.Conclusions and RecommendationsFrom work completed to date, particularly the independent, expert high grade estimate for the BouroNorth Dyke, it can be concluded that larger scale bulk sampling followed by underground trialmining of the Bouro North kimberlite dyke is justified and should be pursued as a high priority.7.4 WAD’s Bomboko Alluvial Diamond ProjectIntroductionSince acquiring the project in 2007, WAD has completed the following exploration on the licence area:• Hand-dug sampling pits to substantiate AA Mining’s findings,• Bulk Sampling that is in progress.Bulk SamplingThe bulk sampling exercise began in March 2009, using a mobile 10’ pan plant. The plant consistsof a vibrating grizzly with spray bar, a scrubber equipped with trommel sieves to remove +32mmsized material, a 10’ rotary pan, -2.5mm undersize screens and a screw-feed tapping system toremove concentrate from the pan into concentrate bins. The bins are removed to a final recoverysection. The 10’ pan plant has a capacity of between 10 and 15 tonnes per hour, dependant on theamount of clay that needs to be broken down in the scrubber.The final recovery section consists of two banks of Bushman jigs equipped with 5 screens each;after jigging a load of concentrate, the jig baskets are removed and hand sorted to extractdiamonds. The sort tailings are collected in two sets of buckets (large size concentrate and smallsize concentrate) and passed over two grease tables to ensure complete extraction of diamonds.The grease table rejects are re-jigged, hand sorted and again passed over the grease table beforebeing removed to a waste dump. Improvements to security and throughput of this section wouldinclude X-ray sorting, glovebox sorting and better control on access.Between 18 March and 1 July 2009, the 10’ pan plant processed 9,222 tonnes of gravel to produce1069 stones weighing 560.4cts indicating an average run-of-mine grade of 6.07cpht and averagestone size of 0.524cts/stone.In mid-September 2009 a 16’ pan plant was erected and commissioned on site and since20 October 2009 has been in full production on a 10-hour a day shift. The plant has a vibratinggrizzly on a feed box with jet sprayer, a very large capacity scrubber equipped with trommel sieveto remove -2.5mm undersize material and +25mm oversize. The rotary pan has a puddle tank andscrew-feed concentrate tapping into a removable concentrate bin. The capacity of this pan plant isbetween 100 and 120 tonnes per hour.Since production start-up of this plant, it has treated 18,157.7 tonnes of gravel and produced954 stones weighing 549.89cts for an average run-of-mine grade of 3.03cpht – the average stone sizeis 0.576 cts/stone.The large capacity gravel bin and scrubber section is sufficient to provide enough sized materialfor a second 16’ pan, which will double the production throughput.Mining is done using a large capacity Volvo excavator with 3m 3 bucket which strips overburdeninto previously mined cuts and then extracts the gravel ore onto hard-standing heaps. A3m 3 Furukawa front-end loader loads a single 27 tonne Terrex ADT which transports the materialsome 2km to the plant stockpile, where a Volvo FEL again loads material and dumps into thegrizzly bin. The volume treated is calculated from a count of FEL bucket loads onto the grizzly.A 1m 3 Volvo excavator is used for exploration trenching and a D6 Caterpillar bulldozer is usedfor overburden stripping and rehabilitation of waste.138

The stripping, mining and transporting are done on a 22-hour shift cycle and processing is doneon a 10-hour per day basis. Two additional 10 tonne tipper trucks are about to be leased tosupplement the transport of material to the plant so that 24-hour processing can be achieved.The results to 22 November 2009 are summarized in Table 14 & 15 below.Table 14: Bomboko Project – Bulk Sampling Results(as at 22 November 2009)Grade Av. Stone SizePlant Tonnes Processed Stones Weight (cts) (cpht) (cts/st.)10’ pan 9,221.76 1,069 560.41 6.07 0.52416’ pan 18,157.72 954 549.89 3.028 0.576Totals 27,379.48 2,023 1110.3 4.06 0.549Table 15: Bomboko Project – Diamond Exported Inventory(as at 24 November 2009)Est. Value(US$/ct)Category Government Proportion of Total (%)in stock Weight (cts.) valuer By Weight By ValueGem 586.57 217.90 52.94 89.9Industrial 395.68 34.71 35.71 9.66Boart 125.83 1.00 11.35 0.09Total 1,108.08 128.31A parcel of 670.44cts was exported for sale by tender in South Africa at the end of November andachieved an average sale price of US$121.59 on 3 December 2009.Conclusions and RecommendationsThe following conclusions and recommendations are made from the exploration and evaluationresults to date:A global deposit grade of 4.06cpht is indicated from the bulk sampling and treatment to date.The above grade is seriously undervaluing the deposit because of: (a) overmining, with too muchdilution from both overburden and bedrock, (b) tonnes processed is over-estimated from FEL loads– the maximum bucket capacity of 3m 3 is used to estimate volume (or, using a SG of loose, wetgravel of 1.8 = 5.5 tonnes/bucket) fed to the plant, whereas under-loading the bucket is common,since the bucket cannot be overloaded.Improvements to mining, grade control and estimates of tonnage throughput will greatly improve thequality and quantity of the diamond grade estimate of the deposit. Pan plants are known to have onlyan 80 per cent. recovery efficiency whereas DMS plants have significantly better recoveries.Management should consider acquiring a DMS plant for Bomboko.The quality and high average stone size of diamonds produced to date (0.549 cts/st.) and thereforevalue is very encouraging with a gem to non-gem ratio of 53:47.The exploration results from AA Mining’s sampling needs to be combined with the WAD data toproduce a comprehensive map of gravel location and grade distribution within the licence area.Following the production of such a set of maps, an improved resource estimate can be made andmining blocks and a mine plan can be created to guide bulk sampling.If the resource size and estimated grades justify full scale mining, then additional miningequipment, particularly additional dump trucks, an additional 16’ pan (or a DMS plant) and animproved final recovery section will bring greatly improved economies of scale.139

The bottom screen size of both plants is set at 2.5mm (equivalent to 0.167 cts) and is too large torecover all of the commercial sized stones and could be reduced to 2mm (0.086cts).The present plant site is too far from the mining area, adding not only to transport costs but also todelivery time and truck utilization. Short-term solutions are to mine cuts closer to the plant. In thelonger term, the plant should be moved to a central location on the river flat.The trucks should be loaded directly out of the pit by the excavator, avoiding double handling atthe mining site and save the additional cost of an FEL.7.5 Stellar and WAD’s Droujba Diamond ProjectIntroductionSince acquiring licences over the project in 2007, Stellar and WAD have completed the followingexploration of the licence area:Stellar has done a ground geophysical survey using both Max-Min Electro-magnetics and groundmagnetics over a 2,900m EW by 1,500m NS grid area centred on the Droujba kimberlite pipe anda 1,000m EW by 1,500m NS grid over a known kimberlite dyke, the Kasablanca Dyke.During 2008 Stellar collected some 306 stream sediment samples for KIM’s over their originalthree licence areas and further loam samples over a heavily mined (artisan diggings) area.WAD has commissioned a review report by D.Sutherland (Sutherland, 2008) of the entireBounoudo Diamond District which records and considers the results of all the historicalexploration and mining in the District with conclusions and recommendations for furtherexploration work.WAD has completed a ground geophysical survey over a 1,000m by 1,000m grid area centred onthe Droujba kimberlite pipe and includes Max-Min Electro-magnetics, ground magnetics, groundgravity and CSAMT (magneto-tellurics) methods.WAD has used a small, portable diamond drill rig to complete 164.3m of core drilling in 14 holesin and around the Droujba pipe in an attempt to define the limits of the kimberlite belowthe overburden.WAD has transported a mobile 5 tonne per hour DMS sample processing plant to site at theDroujba pipe.Stellar’s Regional Stream KIM SurveyDuring 2008 Stellar collected some 306 stream sediment samples in the region for KIM recoveryand analysis. The sample locations and summary results are shown in Map 21 below.140

Map 21: Droujba Project – Results of Stream KIM SurveyStellar’s Geophysical surveyThe surveys of two grids were commissioned in August 2008 and performed by contractor KelvinAnderson using Max-Min Electro-magnetic and ground magnetics. The survey objective was to(a) try to define the limits of the Droujba kimberlite pipe both immediately below overburden andits continuity with depth, (b) to identify and define any kimberlite dykes and other pipes withinthe survey area, (c) to define and measure the extent of the Kasablanca Dyke.Maps 22, 23, 24, & 25 below summarize the results of the surveys and locations of definedanomalies.It was concluded that the Stellar geophysical survey indicated 3 known kimberlite dykes,4 potential small pipes (blows) and 7 new dyke targets in Block 1 around the Droujba pipe; 1 smallpipe or blow target and 9 newly outlined dyke targets in the Kasablanca dyke (Block 2) area.141

Map 22: Droujba Project – EM Survey of Block 1L=Droujba pipe142

143Map 23: Droujba Project – Magnetic Survey of Block 1

Map 24: Droujba Project – EM Interpretation Block 2144

Map 25: Droujba Project – Ground Magnetic Survey Block 2WAD’s Geophysical SurveyThe survey was performed by contractor Dedela Mining Consultants in January 2008 over a gridarea of 1,000m by 1,000m centred on the Droujba pipe and using Controlled Source AudioMagneto-tellurics (CSAMT), Ground Magnetics, Electromagnetics (EM) and Gravity methods.145

The survey objectives were to (a) try to define the limits of the Droujba kimberlite pipe bothimmediately below overburden and its continuity with depth, (b) to identify and define anykimberlite dykes and other pipes within the survey area.Maps 26 & 27 below summarize the results of the survey and locations of defined anomalies.The survey results were interpreted by the geophysicist as follows: “The footprint of the knownDroujba kimberlite pit sticks out well as an amalgamation of several low lobe (blue) and onerelatively high lobe (green) in the centre of the grid (figures 1 to 4 below). The three known dykes(marked as black lines) to the immediate SE of the Droujba pipe are highlighted as a combinationof linear highs and lows striking in a NW-SE direction. The prominently NW-SE trending Koiyang– Kolokoro fault system can be well traced on either side of the Droujba pit footprint. The faultsystems perpendicular to this system as well as associated amphibolite and dolerite dykes arealso clearly seen trending in SW-NE direction.From the images above and on one of these lineaments approximately 240m north of the waterfilledDroujba pit a well defined irregular almost bi-polar feature sticks out (ringed with a blackcircle for emphasis). Just like Droujba this feature also looks like a composite body made up ofseveral low and relative higher lobes. The contour image on figures 1,3 and 4 clearly defines thissemi-circular feature. Similar analogy can be drawn fro the existing Droujba pipe though in theabove case the shape and size seems to change dramatically. Overlapping the contour images onthe total field intensity map highlights and clearly defines in a well constrained manner the twoprominent systems of lineaments and dykes within the Droujba licence area.Several other bi-polar features also mapped on the grid. The most prominent one is about 170mNE of the centre of the Droujba pit. Two other similar but less regular features can be clearly seennear the SW corner of the geophysics survey grid. Similar signature but of relatively smallerfeatures can be observed wedged next to the Kolokoro fault/dyke system in the SE corner of theGrid. The magnetic low on the western edge of the grid is coincident with the Koiyang – Kolokorofault system. In all likelihood these could be several dykes or blows on dykes whose geophysicalsignatures are producing one coalesced anomaly. Resolution of the current survey may not havebeen sufficient enough to unravel the geology here conclusively”. (D. T. Munyawiri, Jan 2008.)It was concluded that: “Results of this survey indicate that in addition to potential new targetslikely to be kimberlite, there is new information about the known shape and size of the kimberlitepipe that could have an up-side potential to ore volume of the Droujba kimberlite ore body. Theresults further re-enforce the advantages of using multiple geophysical methods in an integratedgeophysical survey in order to solve geological problems. As a result of this integration and jointinterpretation, this survey was successful in mapping most of the known prominent geologicalfeatures including the faults, dykes and kimberlitic anomalies. In addition, the survey highlightednew geological anomalies with geophysical signatures whose shape and signal strength is suchthat they make potential new drilling targets for the exploration of kimberlites as well as evaluationand further assessment of existing ore bodies. It is recommended that the area immediate SW ofthe known pipe be drilled first to confirm the breccias and to try and cut through these breccia toconfirm if indeed these are breccias that might have collapsed into and diluted kimberlite in a pipe.The rest of the ranked targets should also be tested by means of drilling. Should drilling targetscategories 1 and 2 produce positive results that should further justify drilling target category 3 ona traverse of relatively tightly spaced drill holes to try and analyse and unravel the cause of thatanomaly. Overall, the complexity of the Droujba geology coupled with the presence of very hardresistive layers of laterisation indicate the need of a very powerful drilling rig with sufficient powerto punch through these resistive hard iron rich layers and country rock breccias to depths ofapproximately 120-160m and more. Choice of drilling method will also be an important factor. Itmay be useful to try inclined borehole drilling in order to overcome some of the potential drillingchallenges likely to be encountered due the geological complexity.” (D. T. Munyawiri, Jan 2008.)146

Map 26: Droujba Project – WAD’s Geophysical Results SummaryMap 27: Droujba Project – Second Target Area SW of Droujba Pipe147

Conclusion regarding the WAD Geophysical surveyIt seems as though the oval shaped dipolar anomaly to the NW of the known sub-outcroppingDroujba pipe is a priority target since it suggests the possibility that the Droujba pipe has beenfaulted and continues in this location at depth. There is another subtle anomaly immediatelyadjoining the pipe to the SW and this should also be followed up with deep drilling.WAD’s Drilling ProgramThe Drill program was performed in March 2009 using a very small portable diamond drill rigcapable of penetrating to a maximum 50m depth.The results are summarized in Table 16 and locations shown in Map 28 below.Table 16: Droujba Project – Drilling Results SummaryHole No. Depth m. Geology of IntersectionsSB – 1 16 KimberliteSB – 2 15.3 GraniteSB – 3 19.5 GraniteSB – 4 22 KimberliteSB – 5 25 Hard conglomerate/GraniteSB – 6 21 GraniteSB – 7 20 GraniteSB – 8 3.5 Amphibolite/DoleriteSB – 9 3.5 Amphibolite/DoleriteSB – 10 5.5 Amphibolite/DoleriteSB – 11 3.5 Amphibolite/DoleriteSB – 12 2.5 Amphibolite/DoleriteSB – 13 3.5 GraniteSB – 14 3.5 GraniteTotal 164.3Map 28: Droujba Project – Location of Core Holes148

Conclusions and RecommendationsIn considering the combined results of exploration carried out within the larger Stellar Droujbalicence area, it can be concluded that:• Exploration of the region has not found all of the probable dykes or pipes in the field.Further follow-up by means of stream and loam KIM sampling is recommended.• Field mapping of the alluvial diamond flats and terraces and artisan workings is requiredto accurately assess the potential alluvial areas that remain to be explored.• The EM results indicate that the Droujba pipe (blow) may be displaced to the south-westand a series of inclined diamond drill holes, capable of drill depths of 400m, need to beimplemented to evaluate the depth extent of this kimberlite occurrence and by means ofmicro-diamond analysis to determine the possible grade of the body.• Trenching and pitting of the known dykes in the area should proceed to determine their(a) KIM mineral chemistry leading to an assessment of diamond carrying capacity and(b) Mini-bulk sampling for micro-diamond analysis to determine a possible range of grades.8. Current Exploration on the Sierra Leone PropertiesThe recent exploration and development of the various projects in Sierra Leone is described inthis section.8.1 Stellar’s Kono Kimberlite Dyke ProjectIntroductionFollowing the cessation of the civil war in 2002, Mano River Resources (“Mano”) proceeded toobtain as much data about previous SLST and NDMC exploration as possible and managed toobtain the mapped locality of several known kimberlite dykes, known as the Lion Dykes. Fieldchecking of these localities by mapping the locations of artisan diggings away from alluvialdeposits, as well as collecting stream and soil samples for Kimberlite Indicator Minerals(“KIM’s”) was undertaken to confirm the extent and existence of these dykes.Mano decided that the project should be joint ventured with a well experienced kimberlitefissure mining company and persuaded Crown Diamonds Ltd, a respected fissure miner in SouthAfrica to enter into a co-development agreement. The joint venture company was registered asBasama Diamonds Pty Ltd and the Exploration Licences were transferred to that company on1 February 2005.Stellar was formed in May 2007 to hold all of the diamond properties of parent Mano RiverResources and took effective control of exploration and of the minority holding in Basama sincethat date. Crown Diamonds merged with Petra Diamonds Ltd in May 2005 and Petra took controlof its majority stake in Basama.Since 2005, Basama has:• Continued the sampling and location program initiated by Mano, locating the Lion-1 toLion-10 and associated dyke systems.• Commissioned, in March 2008, an airborne DIGHEM survey at 75m line spacing over thetwo licences in order to try to trace the extent of the dykes and also to eliminate thepossibility that there were undiscovered kimberlite pipes of significant size within thelicence areas.• Constructed, transported and erected on the foundations of the original SLST power stationsite at Yengema an exploration camp, a 75tph DMS diamond recovery plant with 3-stagecrushing, screening, DMS cyclone, and grease table final recovery sections.149

• Sunk the Pol-K (Lion-7), Bardu (Lion-5), Lost (Lion-5), Black Rock (Lion-3), Bakarr(Lion-2) and Palm (Lion-2) vertical trial mining shafts to explore and evaluate thecommercial mining of the various dykes and produced 4,213.64 carats of diamonds fromshaft, development and trial mine stope material.• Suspended the trial mining program at the end of May 2009 because of the continuedweakness of the diamond market. The camp, plant and the shafts are now on careand maintenance.• Commissioned a statistical evaluation of diamond sizes and values from parcels of stonesfrom the Bardu and Pol-K shafts.• Sampling, mapping and evaluation of the high-priority EM anomalies as well as ofextensions to the known Lion-1 and Lion-5 dykes where good KIM chemistry indicatesgood diamond grades could be expected.Dyke Definition ProgramMano and Basama have traced and mapped 11 kimberlite dyke systems within the licence area,Lion-1 to Lion-10 and the Pol-K dyke with a total strike length of some 17km. The dykes aretypically narrow with average 1m. width but pinch and swell along strike and may vary betweenmm thicknesses and as much as 3m thick. The dykes are usually discontinuous en-echelon dykeswith a general strike direction of 060 ° and are known to vary between vertical and -60 ° dips.Lion-5a & b dykes can be traced eastward and are feeder dykes to Koidu Pipes 1 & 2 (1km and1.5km to the north-east) which are the largest known hard-rock commercial diamond resource inWest Africa. The Pol-K dyke is along strike of the WAD Koidu pipe 3 (some 4km NE) and mayhave been a feeder to it (see Map 29 below).Map 29: Kono Project – Location of Kono Dykes Mapped to Date150

Stream and loam samples have been collected within the licences and the results are summarizedin Maps 30 & 31 below.Map 30: Kono Project – Summary Results of Stream SamplingMap 31: Kono Project – Location of Loam Sampling GridsBetween 2002 and 2003, 23 grab kimberlite samples were collected from various locations withinthe Licenses. These samples were washed on site for indicator minerals and macro diamonds andthe results are summarized in Map 32 below.151

In April 2005 four rock samples from artisanal workings/pits were collected byBasama Diamonds Limited and processed for the recovery of KIM’s and then analysed for theirmineral chemistry. These results are also summarized in Map 32 below.Map 32: Kono Project – Location of Rock Samples for KIMsIt was concluded from analysis of the garnet mineral chemistry that Lion 3 and Lion 5 dykes havethe highest number of garnets falling above the graphite/diamond constraint as illustrated inMap 33 below and are regarded as high interest with respect to diamond potential.Map 33: Kono Project – Garnet Chemistry from the Lion 1-5 Dykes152

Between 2005 and present, 29 trenches have been sunk at various sites on the known kimberlitedykes for strike, width and depth (to kimberlite) determination See Map 34 below.Map 34: Kono Project – Location of Dyke TrenchesNo micro-diamond sampling was done, but approximately 1-tonne weathered kimberlite sampleswere collected from various artisan diggings and from trenches. The samples were wet-sieved to+0.71mm, hand jigged and diamonds collected from the concentrates. The results are tabulatedbelow in Table 17 and locations marked in Map 35 below.Table 17: Kono Project – Mini-Bulk Sample Results – Lion DykesNo. of Sample Est.Dyke Diamonds Grade (cpht)Lion-1 22 65Lion-1 5 15Lion-2 35 45Lion-2 14 46Lion-3 0 0Lion-5 22 94153

Map 35: Kono Project – Mini-Bulk Samples and ResultsIt was concluded that the dyke systems were extensive, and diamondiferous. Since furtherexploration would require bulk sampling, it was recommended internally that instead of drillingalong strike and down-dip in an attempt to define continuity and to estimate resource tonnage,trial mining was required. This would enable large bulk samples to be collected and processed inorder to determine the diamond grade and value of the dykes tested, something which drillingwould not be able to achieve.The Airborne EM programThe airborne EM program was contracted to Fugro Ltd and conducted between March and April2008 using a helicopter equipped with a DIGHEM system. Flight lines were 75m apart and a totalof 3,037 flight and tie-lines were completed. Fugro reported some 193 priority anomalies and thePetra geophysicist J.Bell reported some 79 priority anomalies.Basama geologists followed up on the highest priority anomalies by field visits, sampling andtrenching. Many of the anomalies were cultural (buildings and bridges) and none of the remaininganomalies were associated with kimberlites. Some 15 anomalies still need to be followed up inthe dry season.It can be concluded from anomalies followed up to date that the airborne DIGHEM program hadfailed to locate any further kimberlite dykes. The results did eliminate the possibility that theremay be a significant sized kimberlite pipe within the licences.154

The Dighem anomalies picked by Petra’s geophysicist are shown below in Map 36.Map 36: Kono Project – Dighem AnomaliesTrial Mining Program (Sobie & McGeorge, 2007)Petra Diamonds commenced trenching and shaft sinking on its 51 per cent./49 per cent. jointventure with Stellar during 2006. The shaft sites were selected after examination of artisanalworkings and the digging of 30 trenches to expose the kimberlite dykes. The trenches are sitedbased on various sources of information including previous work by Mano, Quick Bird imagesand artisanal activity. They were dug by manual labour and constructed using benches to reachfinal depths of 6 – 13m in the decomposed rock. The water table in the area is invariably at6 – 7m. The kimberlite samples obtained are very weathered and contaminated.Six shafts have been sunk to the mini-stoping depth of 30m (see Map 37 below), whilst deepeningof Bardu and Pol-K Shafts to the 46m and 81m levels respectively was completed by the datewhen Basama decided to cease operations. Underground development has been done on all of theshafts. As of the date of closure, shaft depths and development stoping and run of mine tonneshoisted to date are given in Table 18 below.155

Map 37: Kono Project – Compilation and Trial Mining ShaftsTable 18: Kono Project – Trial Mining Sample DetailsTotalTonnesDyke Shaft Depth (m) Development Treated StatusLion 2 Bakarr 31.7 14m NE & 19m 459.8 Care & MaintenanceSWLion 3 Black Rock 30 39.7m to NE 26.8 Closed – poor resultsNil to SWLion 5 Lost 30 39.5m NE & 43m 71.5 Closed – poor resultsSWLion 5 Bardu 32 level 53m to NE & Care & Maintenance25m to SWLion 5 Bardu 46 level 52m to NE & 3,108.7 Care & Maintenance90m to SWLion 7 Pol K 32m level 78m to NE & Care & Maintenance172m SWLion 7 Pol K 64m level 78m to NE & Care & Maintenance127m SWLion 7 Pol K 71m level 9m to NE & Care & Maintenance17m to SWLion 7 Pol K 81m stopped 8,602.4 Care & MaintenanceLion 2(N) Palm 11 12 Abandoned: bad groundTrial Mining MethodThe shafts, which are 4m x 4m, are sunk on kimberlite, and a 5m shaft pillar left in place beforedevelopment is initiated in both directions along the dyke away from the shaft. The developmentthen follows the dyke, by means of fissure drives, which have a width of 1.5m and height of 2.5m.All rock is brought to surface in (nominal) one tonne skips, whilst man access is by ladderways.At the shaft head, the larger blocks of waste are removed from the ore by hand.156

The dyke width is regularly measured on the face to provide an estimation of dilution. Thetonnage mined (“run of mine”) is calculated by counting the number of tonne skips. This isreconciled with the cubic metres mined as measured underground, with a tonnage factor of 2.65applied. The proportion of in situ kimberlite to waste is estimated by measuring the width of thedyke in the development end, and a correction applied to the run-of-mine tonnage to give tonnesof “in-situ fissure”.At Pol-K Shaft, box holes and mini-stopes in the hanging wall were developed. Trial stope miningbetween the 32m and 64m level was undertaken for a distance of 172m away from the shaft in asouthwest direction and 78m in a northeast direction. The northeast stope was closed due toinstability, however the southwest stope was stable and provided most of the run of mine tons forprocessing. Further stoping between the 64m and 71m levels proceeded for 9m to the NE and 17mto the SW. The Pol-K shaft was also sunk to 81m before the care and maintenance was imposed.At the Bardu shaft stoping between the 32m and 46m levels proceeded for 53m SW and 90m NEbefore the care & maintenance decision.The Black Rock, Lost Shaft and Bakarr Shafts are on care and maintenance followingdevelopment being stopped in favour of work on the other two shafts. At Black Rock the dyke hadan associated well developed fracture cleavage, but narrows to 5cm at 30m, and is considered toonarrow to be followed at present.At Lost Shaft, the 25cm dyke at surface pinches out at 30m, but re-appears 2m to the northwestwhere it was again exposed by development, with a width of 40 cm. It was followed 12m to thenortheast, where it again pinched out. To the southwest the dyke maintains its width, but does nothave an associated fracture cleavage, which resulted in over-break and increased dilution ofthe kimberlite.Mining is done by Petra’s staff, seconded from its South African mines to Basama whilst Stellarprovides geological supervision.Processing of the kimberliteIn June 2006, the joint venture commissioned a 75tph bulk sampling plant built at the site of theold SLST power station in Yengema. The key features of the plant are as follows:Ore is hauled to pads where it is stockpiled by shaft, with each two metres of development beingpiled separately.The ore is passed through a 300mm grizzly into a feedbin, from which it is taken by conveyor toa 35mm trommel screen. The oversize from this screen goes along a picking belt, where waste isremoved by hand under geological and security supervision. This material then passes to theprimary jaw crusher, which is set at 400mm. The undersize is washed and passed over a 0.8mmscreen, with -0.8mm going to slimes.The +0.8mm -35mm material goes to a 30mm scalping screen, and the oversize sent to thesecondary cone crusher.The -30mm material is fed into the DMS plant, which has an effective capacity of 22 – 24tph.The DMS lights go to a tertiary Hazamag crusher set to 6mm, with the -6mm being sent to slimes,and the balance re-treated through the DMS.Final recovery is by means of grease tables. The DMS concentrate is classified into +15mm and-15mm fractions, which are fed to separate grease tables. The grease table products are passedthrough a magnetic separator, before the diamonds are recovered by hand-picking. The greasetable rejects, or “bantams”, are passed over the grease a second time. Diamond recovery is donein the presence of two approved senior joint venture staff and the Government mines monitoringofficer (MMO). Diamonds are placed in safes within a strong room within the final recovery unit.The strong room has two keys, one of which is held by an approved joint venture staff member,the other by the MMO.157

Results to DateResults to date are given in Tables 19 & 20 below.Table 19: Kono Project – Trial Mining ProductionShaft Treated (tonnes) Stones (st.) Weight (ct.) Rom Grade (cpht) Av. Size (cts/st)Pol-K 8,602.4 39,702 3,209.55 37.31 0.08Bardu 3,108.7 11,858 867.47 27.90 0.07Bakarr 459.8 741 64.05 13.93 0.08Black Rock 26.8 76 5.15 19.22 0.07Lost 71.5 145 13.25 18.53 0.09Palm 12.0 136 12.2 101.66 0.09Totals 12,281.2 52,658 4171.67 0.08Table 20: Kono Project – Trial Mining Diamond ValuesGDDO Value Exported Sales PriceShaft Date No. Carats (US$/ct) Values (us$/ct) (US$/ct)Bardu Sept 2008 252.93 133.4 — 52.41Mar 2009 460.69 53.96 36.66 46.34Apr 2009 70 75.33 110.03Jun 2009 71.97 102.67 61.43 85.00Weighted average 82.58 48.14 51.84Pol-K Sept 2008 810.7 133.4 — 152.00*Mar 2009 1,410.51 53.96 91.79 46.34Apr 2009 755.18 75.33 66.23Jun 2009 201.42 102.67 87.52 85.00Totals 4,033.4Weighted average 82.58 83.27 84.91Note:(1) GDDO is the Government Valuation Office (2) The high sales price is skewed by thepresence of 1x 10.5ct stone sold for US$2,762.04/ct.Oosterveld’s Analysis of the Diamond ProductionIn April 2009, the sizes and values of a 1,410ct parcel of diamonds from the Pol-K shaft andtwo parcels totaling 510 carats from the Bardu shaft sampling were sent to Mr. M.M.Oosterveld inorder for him to perform an independant statistical analysis on the size and value distributions ofthe production with the objective of (a) Determining the possible absence (theft?) of larger stonesand (b) Determining the probable frequency of occurrence of large diamonds in the two dykes.Oosterveld, 2009 concluded as follows:• The size distributions obtained for Pol K and Bardu are normal for kimberlite and indicatesmall average stone sizes in comparison with other kimberlites. The average stone size forPol K is larger than for Bardu.• The value of Pol K at 92.01$/crt (including the coated stones) falls in the medium valuerange in comparison with other kimberlites. The parcel for Bardu is small at some460 carats but the value per sieve class comparison also indicates that the Bardu diamondvalue is lower than Pol K at an average of 36.66$/crt.• To obtain more accurate value information for the Kono kimberlite dykes much largerdiamond parcels would be required. The normal practice for resource estimation forkimberlite is to obtain a diamond parcel of at least 3,000 carats, preferable 5,000 carats.The diamond size frequency obtained is than modeled for production treatment plantrecovery characteristics and there is also modelling done to estimate the expected large158

stone content. To obtain the estimated value for the larger stones the average size versusaverage value is modeled to estimate the value of the large stones. A certain degree ofextrapolation is required as even in a 5,000 carat parcel the information obtained is toosmall to use the actual values obtained.• A comparison of the size distribution of four Pol K parcels recovered over a 18 monthperiod indicates a constant size distribution. For Bardu the results were more variable.Differences in the size distribution can be the result of different kimberlite types beingmined or differences in the recovery efficiency of the treatment plant. Size distributionsproduced should be reviewed on a regular basis to check for treatment plant efficiency.• The large stone forecast for Pol K indicated that 100,000 carats would produce on average1 stone larger than 100 carats and 43 stones larger than 10 carats. When on a regular basislarge amounts of carats are produced the large stone recovery should continuously bechecked to detect treatment plant problems or security problems.Conclusions & RecommendationsThe following conclusions can be reached from exploration and evaluation work completed in theKono licences to date:• The licence area has been thoroughly explored by stream, loam and rock sampling, bymapping of artisan activity and by airborne EM and there is a very low probability thatfurther kimberlite dykes or pipes could still be discovered.• The mineral chemistry results of dyke samples indicate that Lion Dykes 3 & 5 have the bestdiamond potential.• The mini-bulk sampling indicates that Lion Dyke 5 (94 cpht) and the eastern portion ofLion Dyke 1 (66 cpht) have the best indications of commercial potential. The mini-bulksampling of Lion Dyke 3 was well below expectations from the mineral chemistry resultsand should have been repeated, however trial mining of this dyke also yielded poor results.• The trial mining of Lion Dykes 5 (Bardu shaft) and 7 (Pol-K shaft) have shown that theirfully diluted, run-of-mine grades range between 28 and 38 cpht, that the average stone sizeis likely to be 0.08 cts./stone. Note: The author was not provided with any breakdown ofthe Gem:Non-gem ratio in the various parcels. Note also that the plant bottom screen sizewas 0.8mm, allowing the recovery of stones weighing >0.0087cts. and this accounts for thelarge number of small stones and therefore the very low average stone size.• From the relatively small amount of test mining, it does not appear that either of these twobetter grade dykes are commercially viable under current market conditions, however, it isrecommended that further test mining and evaluation of these shafts is required beforemaking a final decision as to their commercial potential. This should only be done once theplant upgrade recommendations as to weightometers and final recovery havebeen installed.• The principal author has been informed that in the Bardu shaft on the 45m level and 100mSW of the shaft, the dyke swells to a thickness of 3m and is believed to be a differentkimberlite intrusive phase, with a grade of 140cpht and an average diamond value ofUS$87.50 per carat in June 2009. The extent, both vertically and laterally of this differentkimberlite is unknown and it therefore requires further definition and evaluation.• Most of the diamond production was sold in the period September 2008 to June 2009when the market was at the very bottom of the price cycle – see our comments in section 9,page 171, below.• It is recommended that trial mining of Lion Dykes 1 (east) and Lion Dykes 7 (N.E.extension) and possibly Lion Dyke 2 (N) be initiated to fully test their potential.159

• The diamond recovery plant gives some cause for concern. There are no weightometers onthe plant feed belts or on the waste picking belts and tonnes fed to the plant are estimatedfrom FEL loads. This has a serious effect on the calculation of grade, since an over-estimateof the tonnes treated results in an under-estimate of the grade. (I.Jones, 2009).• The bottom screen size used was 0.8mm (recovering down to 0.0087ct stones) and thisseems unrealistically small given that most commercial recovery plants use between 1.5and 2mm bottom screens, recovering 0.036 to 0.086ct stones.The security and efficiency of the plant and particularly the final recovery section shouldbe significantly upgraded. (I.Jones, 2009).8.2 Stellar’s Tongo Kimberlite Dyke ProjectIntroductionFollowing the cessation of the civil war in 2002, Mano River Resources (“Mano”) applied for a9,700km 2 Regional Exclusive Prospecting Licence (“REPL”) in south-eastern Sierra Leone in thename of its wholly owned subsidiary, Sierra Diamonds (SL) Ltd. The property was joint venturedwith BHP-Billiton Worldwide Exploration in May 2004 and a four-phase kimberlite explorationprogram ensued. Following the expiry of the REPL in 2006, the partners selected two areas – theGola Forest and the Tongo area for follow-up detailed exploration. The Ministry, at the urging ofEU environmental pressure groups, refused to grant the Gola Forest licence. The Tongo exclusiveprospecting licence EXPL 5/2007 was granted in August 2007.In March 2008, BHP-Billiton withdrew from the joint venture having spent in excess ofUS$3 million.Koidu Holdings, which has the adjoining licence, bulk sampled the extensions of the TongoDykes in 2007 with 1,000 tonne samples and returned grades of between 196 & 288cpht ataverage diamond values of US$175/ct. (Sobie & McGeorge, 2007).Since August 2007, the following exploration has been completed by the joint venture partnersand after March 2008, by Stellar:• Reconnaissance & detailed follow-up stream sampling for kimberlite indicator mineralsover the entire licence area with the objective of finding additional kimberlites,• Geological mapping of known and newly found Kimberlite dykes including mapping of thedrainage patterns & other surface geology,• Pitting over known kimberlite dykes to determine their lateral extent,• Grab sampling of known kimberlites for Indicator Mineral extraction and, if justified,microprobing of grains to determine their mineral chemistry,• Grab sampling of kimberlite dykes and processing for diamond recovery,• 6 x 200Kg kimberlite samples collected for micro-diamond extraction and estimation ofdiamond grade & size frequency analysis,• Ground Geophysics (EM) survey & anomaly generation for determination of dyke extensions,• Pitting & trenching of EM anomalies (target resolution),• Drilling of 1,219m in 19 holes sited to test EM targets and some known dykes(target resolution),• Pitting & trenching. Site selection for mini bulk sampling exercise,• Mini Bulk Sampling for kimberlite Grade determination & valuation.• Macrodiamond statistical analysis (MM Oosterveld, 2009).160

Reconnaissance Loam & Stream SamplingDuring 2007, eighteen Reconnaissance stream samples and 48 follow-up stream samples forkimberlite indicator minerals were collected & processed. The results from the positive indicatormineral counts suggest that there is a spinel rich source with predominantly ilmenite present. Nonew kimberlites were discovered from this campaign. Map 38 below shows the location of thesamples and those with positive indicator mineral results.Map 38: Tongo Project – Stream Sediment Sample ResultsGrab Rock Samples from Known Kimberlite DykesIn 2007, sixteen grab rock samples were collected from known kimberlite dykes and processed toobtain their kimberlite indicator minerals (“KIM’s) and then analyse these mineral grains using amicroprobe to obtain their mineral chemistry. The location and results summary of this samplingis shown in Map 39 below.The KIM’s confirm the high spinel content of the dykes and also show that Dykes 1 & 2 have areasonable population of kimberlitic garnet. The mineral chemistry results reveal high interestprimary bodies, with many of the garnets falling within the G10 diamond rather than graphitefield (see Figure 3 below).161

Map 39: Tongo Project – Rock Sample KIM ResultsFigure 3: Tongo Project – Garnet Chemistry162

Dyke Samples for Diamond ExtractionDuring 2008, Stellar collected 22 samples from various sites along the four known dykes(Map 40) in order to obtain an initial estimate of likely diamond grade. The samples wereprocessed by hand and yielded the following results:Table 21: Tongo Project – Dyke Sample ResultsNo. ofPreliminaryTonnes Diamonds Weight of Wet GradeDyke No. processed Stones Diamonds (ct.) (cpht)1 4.2 72 2.85 67.862 1.17 21 1.275 108.973 0.46 2 0.15 32.614 3.7 54 3.195 86.35Map 40: Tongo Project – Location of Rock Samples for GradeMicro-Diamond SamplingIn 2008, six micro-diamond kimberlite samples were collected (Map 41), processed atSGS Lakefield laboratory in South Africa and the resultant data sent to M.M.Oosterveld forindependent statistical analysis.The basic sample parameters were as follows:280 to 378Kg per sample collected from 4 dykes. Dissolution resulted in 1,894 diamondsweighing 2.05cts in total.163

Map 41: Tongo Project – Location of Microdiamond SamplesThe analysis by Oosterveld (M.M.Oosterveld, 2008) indicated that:• All the Tongo dykes appear to have a similar diamond size distribution,• Dyke 3 appears to have the highest grade followed by Dyke 2, 1, and then 4,• 2 Models were used for the total size range suggesting a macro grade of 1,860 & 1,566cpht,• Excluding smaller stones, i.e. 1.18mm, which approximates an economic cut off, the gradesrange from 1,070 to 463cpht. The results are extremely good & warrant further work.Ground Electromagnetic (EM) SurveyIn 2006 a ground EM survey was completed over the known kimberlite dykes to further definetheir extent and any associated pipes or blows.In 2008 the survey lines were infilled over selected anomalous areas to further define theanomalous responses and to select anomalies worthy of drill investigation.164

Map 42: Tongo Project – EM Survey Over Known DykesThe surveys resulted in a number of anomalous targets being identified as shown below inFigure 4.The results and their interpretation can be summarized as follows:• There is a closer relationship between EM “Lows” and swampy ground or valleys thanbetween EM “Lows” and known dykes,• Additional EM targets were tested by pitting & trenching but did not intersectnew kimberlite,• Known dykes occur on dry topographic highs and wet swampy ground, however noEM targets were located on topographic highs,• Targets selected could simply be mapping waterlogged ground,• Drilling was considered a high priority in order to confirm the validity of the EM data andof the above negative interpretation.165

166Figure 4: Tongo Project – EM Survey Anomalies

Diamond Drilling ProgrammeA diamond drilling program was initiated to test 19 anomalous targets, 15 of which were derivedfrom the EM survey and 4 drilled into known kimberlite dykes to test their continuity. A total of1,219 metres was completed and no new kimberlites were intersected from testing the EManomalies, while new information as to the geology and dyke width at depth was obtained fromthe program.Map 43: Tongo Project – Location of the Core DrillholesTable 22: Tongo Project – Core Drillhole DetailsCollar location UTME.O.H.Hole No. X Y Inclination Azimuth depth (m)JVTON001 279351 911993 -47 ° 005 ° 157JVTON002 280048 913508 -60 ° 0 35JVTON003 279928 913260 -50 ° 310 ° 40JVTON004 279819 913334 -47 ° 026 ° 70JVTON005 279746 913457 -60 ° 050 ° 35JVTON006 279260 912975 -50 ° 307 ° 30JVTON007 279258 912804 -47 ° 114 ° 60JVTON008 279150 912812 -60 ° 0 40JVTON009 278320 912559 -50 ° 340 ° 93JVTON010 278438 912156 -65 ° 153 ° 55JVTON011 278673 912405 -47 ° 313 ° 53JVTON012 279138 912196 -65 ° 353 ° 50JVTON013 279645 911734 -47 ° 007 ° 55JVTON014 280182 911894 -47 ° 017 ° 50JVTON015 280107 912250 -60 ° 352 ° 55JVTON016 280587 912155 -50 ° 170 ° 40JVTON017 280515 912527 -50 ° 294 ° 90JVTON018 281333 913029 -47 ° 131 ° 100JVTON019 280638 912736 -47 ° 220 ° 53Pitting and TrenchingIn April and May 2008, 12 pits were excavated on Dykes 1, 2 & 4 with the objective ofdetermining the dyke width, depth to fresh kimberlite, geology of the dyke and the water tabledepth in order to select the best bulk sampling sites.167

Table 23: Tongo Project – Kimberlite Dyke Pit DetailsTrue Width Width of Granite Depth toDyke Pit No. of Kimberlite separations Kimberlite (m)1 9 35cm, 5cm, 54cm 10cm, 33cm 8.510 85cm, 13cm 53cm 11.72 8 20cm, 3cm 6cm 1111 9cm 1012 20cm 154 1 20cm 132 20cm 93 22cm, 5cm 15cm 114 30cm 155 50cm 8.66 10cm 97 40cm 9Mini-Bulk Sampling of Kimberlite DykesSites for bulk sampling were selected on Dykes 1 & 4 and a bulldozer was used to stripoff overburden.At Dyke 4, Site 1, a 50m long trench was planned and stripped to 5.8m depth beforehand-excavating kimberlite to a depth of 8.8m below the original surface. A total of 82.6 wettonnes (53.8 dry tonnes) was excavated and transported to Basama Diamond’s DMS plant atKono. The kimberlite and intercalated granite was very weathered and this contributed to a highamount of dilution. The kimberlite pinched and swelled along strike and down dip but averaged0.5m in width.At Dyke 1, Site 2, a 100m long trench was excavated to an average 7.9m depth and then a 1.1mdeep hand excavated sample of 145.92 wet tonnes (144.5 dry tonnes) was recovered and sent forprocessing at Kono. Again, the granite dilution was high. Dyke 1 was very competent kimberlite,hence the low moisture content.From each of the kimberlites, the DMS concentrates were dispatched to the Stellar Diamondsmineralogical laboratory in Monrovia, Liberia. Here they were examined microscopically for anydiamonds that were missed by the processing plant.From Dyke 1 a further 276 diamonds weighing 6.3 carats were recovered, making a total of129.70 carats of diamonds recovered for a grade of 89.79cpht.From Dyke 4 a further 85 diamonds weighing 1.76 carats were recovered, making a total of53.71 carats of diamond recovered for a grade of 99.79cpht.It should be noted that the diamond recovered in the laboratory were of small size and notnecessarily in the commercial size fraction. However, for the sake of completeness they areincluded in this summary.Nevertheless, for Dyke 1 the presence of ten diamonds in excess of 1 carat (including a singlestone of 4.8 carats) from a small parcel of less than 130 carats is encouraging.Some 100 per cent. of the diamonds exported were classified as gem quality by the Governmentdiamond valuer in Sierra Leone, who assigned an average value of $189 per carat for the smallparcel in November 2008. In Antwerp, however, slightly lower valuations (US$124/ct) were givendue to the adverse market conditions at that time and the diamonds were eventually sold forUS$61/ct in May 2009. In the opinion of Stellar’s management, the December 2009 value of thesediamonds would be above the May 2009 sale value and below the government November 2008valuation and they conservatively estimate a December 2009 value of US$100/ct. (N.K.Smithson,personal communication, December 2009)Dyke 1 clearly has the better quality diamonds.168

The results of the bulk sampling are summarized in Table 24 below.Table 24: Tongo Project – Bulk Sampling ResultsAv.stone Av. gradeDyke Sample tonnes Sieve class Stones Wt. (ct) size (cts/st.) (cpht)4 53.82 +21 5 5.6 1.12+15 15 4.95 0.33+8 192 22.3 0.12+3 467 17 0.04-3 117 1.7 0.02Recovered from re-sort 85 1.76 0.02Totals 881 53.71 0.061 99.791 144.45 +21 22 23.65 1.075+15 75 27.65 0.37+8 418 49.45 0.12+3 593 21.60 0.04-3 71 1.05 0.02Recovered from re-sort 276 6.3 0.02Totals 1,455 129.70 0.09 89.79M.M.Oosterveld 2009 Macro- & Micro-Diamond AnalysisIn June 2009, M.M.Oosterveld was commissioned to analyse the results of both the micro- andmacro-diamond sampling programs. His conclusions are as follows:“The analysis done is based on little data and because the use of only a few samples it is doubtfulthat the results are representative for the dykes as a whole.The models appear to be reasonable continuous from macro to micro and give an indication ofthe total diamond from 0.0001 cts/stn to 10 cts/stn.The lower grade for Dyke 4 as shown by the micro diamonds is not substantiated by the macrodiamond grades where the grade for Dyke 1 and Dyke 4 appears to be approximately the same.Very noticeable is the lower recovery of small stones for Dyke 1 and this must be caused bytreatment inefficiency or non liberation of smaller stones.The recoverable diamond content for Dyke 1 and Dyke4 indicates a grade in the order of some150 cpht. This grade assumes a relatively high recovery of stones between 0.01 and 0.1 cts/stn.”.Conclusions and RecommendationsBased on the exploration work completed in the Tongo licence area to date, the followingconclusions and recommendations can be made:• The licence area has been thoroughly explored by stream, loam and rock sampling, bymapping of artisan activity and by ground EM and there is a very low probability thatfurther kimberlite dykes or pipes could still be discovered.• Dykes 1 & 4 have the best potential for producing commercial diamond grades of the orderof 100cpht with a high probability of producing occasional very large diamonds(Oosterveld, 2009).• The average value of diamonds produced from both Dykes 1 and 4 is estimated to beUS$100/ct. in the current, December 2009 market, but with Dyke 1 diamonds havingapproximately three times the value (US$150/ct)of the Dyke 4 diamonds (US$50/ct). Allof the diamonds recovered in the bulk sampling were classed as gem quality. It cantherefore be expected that there is considerable up-side to the diamond values.• It is recommended that trial mining of Dykes 1 & 4 be initiated to further test their meritpreparatory to a decision as to the commercial potential of mining these dykes.169

8.3 WAD’s Former Sierra Leone ML1/004 – Dump 11 ProjectIntroductionWAD was granted this mining licence in March 2004 and has completed the followingexploration programmes:The collection of a 1,435kg sample of dump material collected from four vertical channelsacross the dump; the sample was shipped to South Africa to test for the gold and platinumgroup metal (“PGM”) content.The construction and commissioning on site of a gold and diamond recovery plant capable oftreating some 80 tonnes per hour of the dump material and then processing a bulk sample.A smaller sample evaluation of all parts of the dump.The Gold & PGM Sample AnalysisGekko Systems were commissioned to examine and perform various tests on the sample to determinethe optimum recovery method. They reported that gold grades varied between 0.24 and 0.51g/t andwas confined to a discrete size range of between -300 and +75 microns and that screening off thissize fraction would substantially upgrade the material, with the coarser fraction going to a diamondrecovery plant. They concluded that gold recoveries of 96.6 per cent. and 25.6 per cent. of PGM’swere achievable by gravity (Falcon or Knelson technologies) methods alone.Their size analysis showed that 19 per cent. of the sample was >1mm and 8 per cent. was >1.5mmwhich was supposedly the bottom screen size of the SLST & NMDC diamond plant.The Bulk SampleThe plant was manufactured in South Africa and shipped to site in the second half of 2007 withcommissioning completed by November 2007. The plant screened off the -900 micron materialand this was passed through a Knelson centrifugal concentrator with the concentrate thenreporting to a shaker table to further concentrate the material. The +900 micron material was fedto a DMS unit to recover the diamonds (Elford & Atcheson, 2008).The plant worked for a 42-day period and processed some 41,962 tonnes of dump material to recoversome 2.7Kg of Gold. A total of 806.2 tonnes of oversize material was processed for diamonds andrecovered 11,739 stones weighing 777.62 carats giving an average stone size of 0.066cts/st. and arun-of-mine grade of 1.85 cpht or 96.45 cpht of sized material. (Elford & Atcheson, 2008).The Systematic Sample ProgramEleven samples were excavated from eight pits sited at various locations over the dump. Samples1, 5 & 6 were extracted from the same pit. The top 2m was discarded before excavating thesamples. The results are shown in Table 25 below. (Elford & Atcheson, 2008).Table 25: Dump 11 Project – Systematic Dump Sampling ResultsDiamond Gold Weight Diamond Gold GradeSample No. Tonnes treated No. Diamonds Weight (cts) (gms.) Grade (cpht) (g/t)BS1 22.03 5 0.80 4.326 3.631 0.196BS2 14.8 0 0 1.140 0 0.077BS3 13.45 3 0.11 0.624 0.818 0.046BS4 14.35 5 0.17 0.284 1.185 0.020BS5 14.17 11 0.59 0.319 4.14 0.023BS6 11.8 5 0.322 0.292 2.729 0.025BS7 13.58 1 0.001 0.224 0.007 0.016BS8 13.09 1 0.15 1.758 1.146 0.134BS9 13.92 0 0 0.370 0 0.027BS10 16.02 1 0.03 0.306 0.187 0.019BS11 14.88 1 0.02 0.260 0.134 0.017Totals 162.09 33 2.193 9.903 1.353 0.040170

The diamonds were valued by the GGDO in May 2008 at US$52.54/ct. Based on this value anda gold price of US$1,000/Troy ounce, the dump material should generate gross income ofUS$2.00 per tonne, which is clearly uneconomic to process.Conclusions and RecommendationsBased on the GGDO value of US$52.54/ct and a gold price of US$1,000/Troy ounce, the dumpmaterial will generate gross income of some US$2.00 per tonne; with direct mining andprocessing costs of over US$3.00 per tonne (Elford & Atcheson, 2008), before depreciation,overheads and royalties.Please note that WAD has now concluded an agreement with Pyramid Resources who will carryout all future exploration and development of the project and will be wholly responsible for anyexpenditure, in exchange for a 5 per cent. net smelter royalty.8.4 WAD’s Former Sierra Leone EXPL8/2002 – Koidu Pipe 3 ProjectIntroductionWAD was granted this mining licence in December 2002 and since that date has completed thefollowing exploration and evaluation work on the property:A limited program of mapping, trenching and sampling of kimberlite dykes in the licence areawas completed. During 2003 and 2004, collected 97 stream samples for KIM’s and for gold and358 soil samples for gold in a follow-up programBetween June 2004 and August 2005, excavated the upper, weathered portion of Pipe 3 toextract a bulk sample.Mapped and surveyed the exposures of kimberlite in and around the pipe.After August 2005, deliberately flooded the pipe to prevent an influx of artisan miners.In June 2004, erected and commissioned a 10’ pan plant to treat the bulk sample material.Treatment of the 20,438 tonnes of sample continued in this plant until October 2005.Between May and August 2007, a further 387 tonnes of kimberlite sample and the retreatment ofpan plant tailings were processed through a mobile 5-tph DMS plant.Dyke Mapping & SamplingThe mapping and sampling program set out to identify on the known kimberlite dykes within thelicence area which had already been discovered by previous operators. Some 18km of dykes weremapped and some 25 samples from eight dykes were collected and treated in the plant. The smallsamples (0.5 to 6.18m 3 or 1 to 15 tonnes) indicated diamond grades of between 3.2 and 95.2cphtwith most samples yielding less than 20cpht. It should be noted that these samples were too smallto be really indicative of the commercial potential of the kimberlite dykes. No new kimberlitedykes were discovered or sampled.Stream SamplingAnomalous KIM results from a cluster of samples in the northern portion of the licence areasuggest at least two new kimberlite dykes may be present. Seven samples in the Nimini Hills areawere anomalous for gold. The kimberlite anomalies were not followed up and a soil samplingprogram over one of the gold anomalies was conducted, but none of the results have been madeavailable to MPH.Pipe 3 Mapping and Bulk SamplingThe mapping and surveying of the surface exposure of the pipe indicates a surface area ofsome 1,500m 2 (0.15ha).171

The pan plant treatment of the 20,438 tonnes of sample yielded 5,670 diamonds weighing1,075.49cts for an estimated grade of 5.26cpht. Parcels of these diamonds were valued by theGGDO in December 2004 (459.93cts averaged US$200.42/ct), May 2005 (373.68cts averagedUS$232.15/ct) and in November 2005 (290.09 cts averaged US$152.62/ct). The gem:non-gemratio was 3.33 to 1 and the average stone size was 0.19cts/st. (Elford & Acheson, 2006).Elford and Acheson, 2006 and 2008 raised several concerns regarding the efficiency and securityof the pan plant and also raised the issue of poor tonnage estimation where over-estimation resultsin under-estimating the grade.In 2007, a mobile DMS plant was used to test the pan plant tailings and the overall grade estimateof the kimberlite was adjusted from 5.26cpht upwards to 9.20cpht.The same DMS plant treated stockpiled kimberlite sample and returned a grade of 19.33cpht.Although the DMS plant treated a very small sample, it can be safely assumed that the true gradeof Pipe 3 is between 9.2cpht and 19.33cpht. (Elford & Acheson, 2008).Conclusions and RecommendationsExploration work to date in the project area indicates that Pipe 3 has a limited tonnage potential,probably of the order of 1 million tonnes to a depth of 300m, based on its surface area andpresumed steep-sided morphology. Although the diamonds produced have high average values ofaround US$200/ct in 2005, at diamond grades of between 9.2 and 19.33cpht it is unlikely that itcould be mined at a profit in the current market conditions.The results of mapping and sampling (although inadequate) for other kimberlite dykes in thelicence area do not provide much encouragement for continuing exploration in this licence area.The Nimini Hills gold in stream sample anomalies, although encouraging, were followed up bygrid soil sampling, but no results have been provided to MPH.Please note that WAD has now concluded an agreement with Thunderball Limited, which willoperate the exploration of the licence area and be wholly responsible for the expenditure. WADwill retain a 20 per cent. interest in the project, free-carried to the start of production.9. A Note on the Diamond MarketThe immediate effect of the financial market crash since September 2008 has been that the demand forand therefore sales of luxury goods, particularly diamonds, have dropped precipitously. This wasaggravated by banks withdrawing diamond cutting centre credit. In recent months, there have beenencouraging signs of recovery, but several market commentators have expressed a cautionary notebecause the underlying fundamentals do not yet support a full recovery to August 2008 levels(C.Wyndham, 2009 & J.Allan, 2009).The behaviour of diamond prices over the recent past is best expressed in the following chart (fromC.Wyndham, June 2009) –Despite the current depressed state of the market there is considerable cause for optimism, as aconsideration of the following factors will show:Rough supply in 2007 was 150 million carats, with 140 million cts in 2008 and it is predicted that only100 million carats will be supplied in 2009 due to mine closures and cut-backs by diamond miningcompanies, particularly De Beers/Debswana (J. Allan, 2009).Aging mines and lack of major new discoveries means that supply will fall over the longer term(J. Allan, 2009).The current de-stocking of the cutting centres and the return of bank finance will stimulate cuttingcentre demand for rough.172

Since May 2009, the USA Consumer Confidence Index has recovered sharply and it is forecast that thedemand for luxury goods will recover completely in 2010. (J. Allan, 2009)James Allan, 2009: Mine Supply and projected Demand curves173

In March 2009, BMO forecast a gradual recovery in diamond prices starting mid-2009, as destockingis completed amidst shortages created by the cuts in sales and production from De Beers and AlrosaBMO Forecast Rough Diamond Index, from J.Allan, 2009.10. Resource Statement10.1 Measured and Indicated ResourcesAll of the established Stock Exchange reporting codes, such as the South African SAMREC code,the Australian JORC code, the Canadian CIM code and the AIM guidelines define categories ofMineral Resources and Reserves in a very similar way. Technical report authors are obliged tofollow the guidelines given by these reporting codes in order to classify the estimates they arereporting into these specified categories and give reasons why they have done so.This report follows the SAMREC code of Diamond Resource reporting, where categories aredefined, with decreasing levels of confidence in the estimates, as follows:“A “Measured Diamond Resource” is that part of a Diamond Resource for which tonnage andvolume, densities, shape, physical characteristics, grade and average diamond value can bemeasured with a high level of confidence. It is based on detailed and reliable exploration, samplingand testing information gathered through appropriate techniques from locations such as outcrops,trenches, pits, workings and drillholes. The locations are spaced closely enough to confirmgeological and grade continuity and sufficient diamonds have been recovered to allow a confidentestimate of average diamond value.”10.1.1 The Mandala Alluvial Project, GuineaThe mining block estimates of overburden volumes, fully diluted gravel volumes, graveltonnages and grades are tabulated in Appendix B (13 pages) and the location of each blockis shown on Maps 17, 18 & 19 above.The mining blocks are divided into sets of Northern, Southern and N’Keleyani Riverblocks and excluding those Southern blocks which are classified as “MeasuredResources”, the estimated Indicated Resources (rounded to the nearest thousand m 3 andcarats) are summarized in Table 28 below.In our opinion, those southern Mandala mining blocks which have been partially bulksampled in the current campaign, and the immediately adjoining blocks can be regardedas having been measured with a high level of confidence. Sufficient diamonds (43,415cts)have been recovered and either valued or sold during the second-half of 2009, to providea confident estimate of the average diamond value of US$30.73/ct. The estimatedresources in these blocks, summarized in Table 26 below (rounded to the nearestthousand m 3 and carats), have been depleted by the amount of gravel already processed inthe current campaign.174

Table 26: Mandala Project – Measured Resource EstimateEst. Gravel Average ResourceVolume ROM Grade EstimateMining Blocks (m 3 ) (ct/m 3 ) (carats)8 & 9 8,000 0.42 3,36016 – 18 21,000 0.625 13,12528 – 30 26,200 0.625 16,37557 – 61 5,753 0.64 3,68275 – 80 32,500 0.80 26,00086 – 90 24,625 1.005 24,74896 – 99 16,500 1.07 17,657107 – 110 10,750 0.937 10,070117 – 120 15,250 0.80 12,201127 – 131 29,751 0.38 11,305138 – 143 22,252 0.38 8,456Totals 213,000 0.6914 147,000Note: The bottom screen size is taken as an effective 1.7mm“An “Indicated Diamond Resource” is that part of a Diamond Resource for which tonnageand volume, densities, shape, physical characteristics, grade and average diamond valuecan be estimated with a reasonable level of confidence. It is based on exploration, samplingand testing information gathered through appropriate techniques from locations such asoutcrops, trenches, pits, workings and drillholes. The locations are too widely orinappropriately spaced to confirm geological and grade continuity but are spaced closelyenough for continuity to be assumed and sufficient diamonds have been recovered to allowa reasonable estimate of average diamond value.” (SAMREC Code, 2006).In our opinion, that portion of the Mandala alluvial deposit outside of the blocks whichform a “Measured Diamond Resource”, as more fully described above, can be classified asIndicated Resources. Our opinion is based upon the following factors:The systematic grid drilling work completed by Star Guineé has demonstrated the extent,physical continuity and thickness variations of the basal gravels which constitute the ore body.Star Guineé also completed a program of systematic grid Poclain pit sampling to test thediamond grade, which because of the small volume sampled is only sufficient to estimatediamond grades at a reasonable level of confidence.Sufficient diamonds from historical and more current bulk sampling have been producedto allow a reasonable estimate of average diamond value at current market prices ofUS$30.73/ct over the whole deposit.175

Table 27: Mandala Project – Indicated Resource EstimateEst. Gravel Average ResourceVolume ROM Grade EstimateMining Blocks (m 3 ) (ct/m 3 ) (carats)North 221 – 226 53,750 1.8 96,773North 230 – 234 52,625 0.77 40,504North 239 – 244 43,750 0.319 13,950North 246 – 252 49,000 0.333 16,300North 257 – 259 26,000 0.575 14,960North 264 – 267 47,500 0.30 14,310North 272 – 273 28,000 0.30 8,440N’Kel 34 – 36 21,500 0.31 6,620N’Kel 73 & 100 12,500 0.13 1,625N’Kel 105 – 107 27,000 0.09 2,550N’Kel 126 – 135 94,500 0.146 13,778N’Kel 144 – 160 168,200 0.26 43,952N’Kel 166 – 186 218,000 0.30 65,170N’Kel 191 – 205 162,500 0.45 72,390N’Kel 207 – 213 79,500 0.17 13,378N’Kel 218 – 236 132,000 0.20 26,775N’Kel 251 7,500 0.04 300N’Kel 258 – 262 33,000 0.28 9,150N’Kel 279 – 281 15,000 0.24 3,550N’Kel 298 – 299 8,000 0.09 720South 10 11,000 0.50 5,500South 14-15 13,000 0.12 1,600South 19 2,500 0.20 500South 25-27 20,600 0.07 1,364South 37-41 17,900 0.60 10,795South 47-52 22,355 1.26 28,201South 56 3,750 0.40 1,500South 65-70 23,126 0.39 8,976South 95 13,500 0.15 2,025South 151-154 8,452 0.40 3,380South 177-178 3,002 0.10 301South 188-189 33 0.30 10Total 1,419,000 0.373 529,000Note:1. The bottom screen size is assumed to be an effective 1.7mm.10.2 Inferred Resources and Exploration TargetsAn “Inferred Diamond Resource” is that part of a Diamond Resource for which tonnage, gradeand average diamond value can be estimated with a low level of confidence. It is inferred fromgeological evidence and assumed but not verified geological and grade continuity and a sufficientlylarge diamond parcel is not available to ensure a reasonable representation of the diamondassortment. It is based on information gathered through appropriate techniques from locations suchas outcrops, trenches, pits, workings and drillholes that may be limited or of uncertain quality orreliability.” (SAMREC Code, 2006).In our opinion, the exploration and evaluation work carried out on the following projects is onlysufficient to assign an Inferred Diamond Resource classification to them and because of the lowlevel of confidence in the estimates, they are expressed as being at the minimum of a range ofpossible tonnages and grades; wherever possible we have also indicated our opinion as to thepossible size of each exploration target where both the minimum and maximum estimate of a rangeof possible tonnages and grades are given:176

The Ouria Alluvial Project, the Bouro kimberlite dykes, the Bomboko alluvial project, theDroujba kimberlite project, the Tongo kimberlite dykes and the Kono kimberlite dyke project.10.2.1 The Ouria Alluvial ProjectThe Ouria River and its tributaries, particularly the right-bank Oubakari stream, drainacross the richly diamondiferous Bouro North Dyke zone and the Central Dyke zone.Reconnaissance sampling by Star Guinée at 18 sites in the Ouria and tributary terracesrecovered diamonds in 10 of the samples totaling 75 stones weighing 13.46 carats. Theglobal grade for the Ouria deposit was estimated to be 0.8cts/m 2 .Sutherland, 2004, estimated an inferred resource in Stellar’s exploration permit area of160,000cts over an area of 200,000m 2 . We have estimated that artisan mining in the Ouriaand its tributaries since Sutherland’s estimate has reduced the available area to between150,000 and 180,000m 2 ; Assuming that Stellar will have to mine a minimum 1m. thicknessof gravel plus weathered bedrock, and assuming a S.G. for the wet gravels of 2.0, then theestimated carats will be recovered by treating between 300,000 and 360,000 tonnes ofgravel at an average grade of 38.09cpht. As the Ouria and Mandala deposits are derivedfrom the same kimberlite dyke systems, it is fair to assume that the Ouria diamonds willhave a similar assortment as the Mandala deposit, with a current average value ofUS$30.73/ct.Table 28: Ouria Project – Inferred Resource EstimateResourceAverage Grade EstimateGrid Tonnage (tonnes) (cpht) (carats)Ouria 300,000 38.09 114,000Note:1. The bottom screen size is assumed to be 1mm.Table 29: Ouria Project – Exploration Target Size EstimateContainedDiamondAverage EstimateGrid Tonnage (tonnes) Grade (cpht) (carats)Ouria 300,000 38.09 114,000360,000 38.09 137,000Note:1. The bottom screen size is assumed to be 1mm.10.2.2 The Bomboko Alluvial Deposit, GuineaWAD and previous operators have done insufficient sampling to date to be able to estimatea resource with any degree of confidence, however, from historical data Elford andAcheson, 2008 estimated that the deposit represented an exploration target of some8 million tonnes of ore gravel with a grade of between 8 and 9.75cpht. The river flat whereWAD is currently bulk sampling has an extent of at least 5ha or 500,000m 2 , the averagemined thickness is 1m. and the gravel has an SG of 2.0, so this represents a tonnage of1 million tonnes; if the current bulk sampling grade of 4.06cpht is a lower limit estimatorof the global grade (see remarks about the current poor mining methods and ROMtonnage estimation in section 7.4 above) while Elford and Acheson’s 9.75cpht is an upperlimit estimate, then Table 30 below summarises the Inferred Resource estimate, roundedto the nearest thousand m 3 and carats while Table 32 below summarises the explorationtarget size estimate.177

Table 30: Bomboko Project – Inferred Resource EstimateResourceAverage Grade EstimateTarget Estimated Tonnage (cpht) (carats)Bomboko flats & terraces 1.0 million 4.06 41,000Note:1. The bottom screen size is assumed to be 2.5mm.The average diamond values of 670.44cts produced to end November 2009 from the currentBomboko sampling campaign was valued by the government valuer in late November 2009at US$128.31/ct and then sold on 3 December 2009 by tender in South Africa atUS$121.59/ct; Although the parcel is less than the statistically desirable 5,000 cts, theUS$121.59/ct is the best available estimate of current average diamond values.Table 31: Bomboko Project – Exploration Target Size EstimateContainedDiamondAverage Grade EstimateTarget Estimated Tonnage (cpht) (carats)Bomboko flats & terraces 1.0 million 4.06 41,0007.0 million 9.75 683,000Note:1. The bottom screen size is assumed to be 2.5mm10.2.3 The Bouro Kimberlite Dykes, GuineaAlthough Star Guinée, Debsam and Stellar have mapped and sampled the dykes, and thereare indications that the Bouro North Dyke zone has a high diamond grade, while the BouroExtreme North, the Bouro Central and Bouro South dykes are diamondiferous, insufficientdrilling and sampling has been done to demonstrate either geological continuity of thedykes laterally and at depth or continuity of diamond grades.Mapping of the Bouro North dyke zone indicates that it extends for at least 5km alongstrike, geophysical results indicate that it may extend a further 4km to the west under cover,and that it varies in thickness from a few centimeters to 2m. Assuming that geologicalcontinuity and grade characteristics are constant over a 100m strike length either side of thehighest grade mini-bulk sample site and also extends 100m below surface, then applying aSG of 2.69, this block contains 107,600 tonnes at an average dyke thickness of 1m. Thehighest grade from the mini-bulk sampling of this dyke returned a grade of 182.5 cpht.M.M.Oosterveld’s 2007 micro-diamond analysis predicted a grade of >400cpht; this gradeestimate provides an upper estimate of contained carats.As an exploration target the Bouro North Dyke system as a whole presents a target of some5,000m of strike length, at an average thickness of 1m and possible depth of mining to1,000m., giving a volume of 5 million m 3 ; using an SG of 2.69, this volume converts to atarget of 13.45 million tonnes. The weighted average grade of the three mini-bulk samplesof this dyke was 148.52cpht; this means the Bouro North Dyke exploration target mayconceptually contain some 20 million carats. This is certainly an exploration target worthpursuing by additional drilling and bulk sampling/trial mining.Table 32: Bouro Project – North Dyke Inferred Resource EstimateResourceAverage Grade EstimateTarget Estimated Tonnage (cpht) (carats)Bouro North Dyke 108,000 182.5 196,000Note:1. The bottom screen size is assumed to be 1mm.178

In the absence of any representative sized diamond parcel, and because of the closeproximity of the Mandala deposits, the value of the Bouro North dyke diamonds can beassumed to be similar to the Mandala alluvial diamonds and have an average current valueof US$30.73/ct.Table 33: Bouro Project – North Dyke Exploration Target Size EstimateContainedDiamondAverage Grade EstimateTarget Estimated Tonnage (cpht) (carats)Bouro North Dyke 108,000 182.5 196,00013.45 million 148.52 20 millionNote:1. The bottom screen size is assumed to be 1mm.10.2.4 The Droujba Kimberlite and Associated Alluvial Project, GuineaWAD and Stellar have not completed sufficient exploration and evaluation work to upgradethe historical estimates of resources on this property. Sutherland, 2007 estimates that thereis only 200,000 tonnes of kimberlite remaining in the Droujba pipe at the historicalsampling grade of 80.08cpht. Geophysical surveys over the area indicate that the pipe maybe considerably larger than originally estimated and Elford and Acheson, 2008, considerthat the size may have doubled.Sutherland, 2007 also describes colluvial and alluvial deposits in many of the tributaryand main streams of the Bounoudou District but lack of modern exploration dataprecludes him from making any resource estimate or even conceptual target size estimatesfor these deposits.Table 34: Droujba Project – Inferred Resource EstimateResourceAverage Grade EstimateTarget Estimated Tonnage (cpht) (carats)Droujba Kimberlite pipe 200,000 80.08 160,000Note:1. The bottom screen size is assumed to be 0.5mm.There is no modern or current production to be able to assign a value estimate for theDroujba diamonds; however the historical production was known to be generally of poorquality with a small proportion of high value diamonds. (Sutherland, 2007).Table 35: Droujba Project – Exploration Target Size EstimateContainedDiamondAverage Grade EstimateTarget Estimated Tonnage (cpht) (carats)Droujba Kimberlite pipe 200,000 80.08 160,000400,000 80.08 320,000Note:1. The bottom screen size is assumed to be 0.5mm10.2.5 The Kono Kimberlite Dyke Project, Sierra LeoneThe Basama Diamonds joint venture has elected not to define lateral and depth continuityof the kimberlite dykes by diamond drilling and has instead begun trial mining of thekimberlite dykes; they have extracted sufficient tonnage of kimberlite from two shafts onthe Lion 5 & Lion 7 Dykes to allow a limited estimate of Inferred Resources as tabulatedbelow (rounded to the nearest thousand m 3 and carats). This estimate is made by assuming179

a 100m extension, laterally and in depth from the last sample points on each of these dykesand applying an SG of 2.65 for the kimberlite and applying the average run-of-mine gradefrom trial mining.It must be noted, however, that both the Pol-K and the Bardu dyke are known to persistlaterally for several kilometres and have the same geological and grade characteristics.Similarly, the depth limit of mining of kimberlite dykes can technically be expected toextend to 1,000m below surface. The Kono dyke project thus has the potential to host aconsiderably greater resource than estimated here. Sobie and McGeorge, 2008, estimated aconceptual exploration target size of up to 5 million tonnes at an assumed grade of between0.5 and 0.8ct/tonne if a 1mm bottom screen was used in the recovery plant, however, itshould be noted that additional tonnage processed since 2008 has shown a decreased fullydiluted global grade of between 0.28 and 0.37ct/t using a 0.8mm bottom screen.The most recent average values attributable to the Kono production indicates a value ofUS$51.84/ct should be assigned to the Bardu resource and US$84.91/ct to the Pol-K resource.However, in the stronger diamond market conditions of September 2008, the Pol-K averagewas significantly higher at US$152/ct (albeit with a stone of > 10 carats size in the parcel).Table 36: Kono Project – Inferred Resource EstimateAverage ROM ResourceGrade EstimateTarget Estimated Tonnage (cpht) (carats)Lion -7Pol-K shaft 26,000 (49%) 37.31 10,000 (49%)Lion -5Bardu shaft 26,000 (49%) 27.90 7,000 (49%)Note:1. The bottom screen size is assumed to be 0.8mm.2. Stellar has a 49 per cent. share of the project and therefore the above figures are the net Inferred resource attributableto Stellar.Table 37: Kono Project – Exploration Target Size EstimateContainedAverage DiamondROM Grade EstimateTarget Estimated Tonnage (cpht) (carats)Lion -7 26,000 (49%) 37.31 10,000 (49%)Pol-K shaft 2.45 million (49%) 37.31 448,000 (49%)Lion -5 26,000 (49%) 27.90 7,000 (49%)Bardu shaft 2.45 million (49%) 27.90 335,000 (49%)Note:1. The bottom screen size is assumed to be 0.8mm.2. Stellar has a 49 per cent. share of the project and therefore the above figures are the net target size attributable toStellar.10.2.6 The Tongo Kimberlite Dyke Project, Sierra LeoneThe Tongo project has only tested a small sample from two of the dykes on the propertyand as with the Kono project only a very small portion of the volume of kimberlitesurrounding the two sample sites can be classified as Inferred resources, although thereis probably a much larger exploration target still to be defined. MPH estimate this targetas follows:Dyke 4 has been traced over an 800m strike length, can be assumed to extend to a similardepth and this represents a target of 861,000 tonnes.Dyke 1 has been traced over a 1,500m strike length, can be assumed to extend to 1,000mdepth and this represents a target of 2 million tonnes.180

In our opinion it is reasonable to assume that the geological characteristics of the kimberlitein Dykes 1 and 4 remain constant for 100m in each direction from the centre of the bulksample pits and extend for 100m in depth. As the average thickness of the dykes was 0.5m,and assuming a SG of 2.65 this means that each dyke has an inferred resource tonnage of26,500 tonnes; the estimated Inferred resource for each dyke, rounded to the nearestthousand m 3 and carats is given in Table 39 below. The bulk samples were treated at theKono plant which used a bottom screen of 0.8mm.Although only a very small parcel of diamonds from each dyke has been produced andvalued, the best estimate value to be applied to the Dyke 1 resource is US$150/ct and to theDyke 4 resource is US$50/ct.Table 38: Tongo Project – Inferred Resource EstimateAverage ResourceROM Grade EstimateTarget Estimated Tonnage (cpht) (carats)Dyke 1 27,000 89.79 24,000Dyke 4 27,000 99.79 27,000Note:1. The bottom screen size is assumed to be 0.8mm.Table 39: Tongo Project – Exploration Target Size EstimateContainedAverage DiamondROM Grade EstimateTarget Estimated Tonnage (cpht) (carats)Dyke 1 27,000 89.79 24,0002 million 89.79 1.8 millionDyke 4 27,000 99.79 27,000861,000 99.79 859,000Note:1. The bottom screen size is assumed to be 0.8mm.11. Data VerificationThe data concerning grades, tonnages, and diamond sizes, as presented in the referenced reports andrepeated in this report could not be verified as the drilling and pit sampling samples were not preservednor were the authors present when the majority of the bulk samples were treated by the variousoperators. There are no records of tailings audits and tracer recoveries from the various plants, so nodefinitive evaluation of plant efficiency can be stated.The authors are therefore unable to express an opinion as to the efficiency of the processing of samplesor to the integrity of the sample from extraction through treatment, and it is beyond both the scope ofthis report and our professional skills to provide a definitive opinion as to the security of the process.None of the sale and valuation certificates for diamonds produced from the Kono plant (including theTongo Project production), or the Mandala plant have been provided or examined.All of the Government valuation certificates for the Bomboko production have been provided and verified.181

12. Conclusions and RecommendationsStellar has, in the Mandala alluvial diamond project, an advanced exploration project which, because ofthe better than expected grade, could easily be upgraded to a full commercial mining operation byacquiring additional mining capacity in the form of excavators and ADT’s. The recovery in roughdiamond prices to the early 2008 levels will certainly justify this additional capital expenditure.WAD’s Bomboko alluvial diamond project requires better definition of the extent and grade of the orebody gravels before execution of a mining block plan and continued bulk sampling. The transfer ofskills, knowledge and experience in alluvial mining in Guinea between Stellar and WAD will alsoadvance this project towards a full commercial mining operation. In our opinion, both the Mandala andBomboko projects could be in full commercial mining production within a year and provide a desirableassortment of rough diamonds.Stellar’s Ouria alluvial project is located some 3km from the current Mandala treatment plant site.Evaluation of Ouria requires systematic pitting or drilling to define the extent and grade of the gravelresource. Since it is so close to the treatment plant, the Ouria resource could add another one ortwo years of life to the overall Mandala project.Similarly, Stellar’s Bouro North kimberlite dyke project is located close to the Mandala treatment plantand the rapid advancement of this project over the next two years would add value to the entire operationat Mandala. The exploration results to date indicate that the Bouro North dyke is high grade; work nowmust define the lateral and vertical extent of the dyke and provide confirmation of the grade by takinga larger bulk sample. These steps are needed prior to a decision on mine development.The Droujba kimberlite pipe requires much more exploration before any definitive statements can bemade about it’s tonnage potential in terms of extent and grade and diamond value. The other kimberlitedykes and the alluvial deposits within the greater Droujba region also have potential and requireexploration and evaluation.The Kono and Tongo kimberlite dyke projects are at an advanced stage where the location of the bettergrade and sized dykes are known. Trial mining needs to be completed at both projects to test theirrun-of-mine grades and determine the feasibility of commercial operations.12.1 The Mandala Alluvial Diamond ProjectAfter six months of bulk sampling, the average recovered grade of the southern blocks is better,by a factor of 1.98, than predicted by the block mining model; the increase in the actual recoveredgrade is thought to be the result of several factors, the most important of which is mining gradecontrol -essentially, good management of dilution in the bulk sample pit. Other important factorsare better recovery due to an efficient plant and better security – the Stellar DMS treatment plantis far more efficient and secure than the jig plants used by previous operators Star Guinea andSearchGold.Diamond sales to 31 October 2009 totaled 33,502cts with gross receipts of US$1,029,514, whichmeans an average price of US$30.73/ct was received. The diamonds are sold by independentagents in Antwerp, through Natural Diamond Corporation, and in Dubai through GlobalDiamond Tenders.Please note that sales are of run-of-mine diamonds and fairly reflect the average value ofproduction in the current weak diamond market (run of mine sales in 2004/5 were $53/ct). Goingforward the diamond market is expected to improve as the world comes out of recession and salesof luxury goods increases (J.Allen, 2009), this will impact positively on the prices of roughdiamonds. See remarks in section 9 regarding the diamond market.It is recommended that Stellar purchase at least one additional 20-tonne ADT and then continuethe bulk sampling program, especially in the Northern and N’Keleyani River mining blocks tomore accurately determine further Measured Resources before proceeding to a feasibility study.A second set of excavators and ADT’s to open an additional mining area will be required toupgrade this project to full commercial mining status.182

12.2 The Ouria Alluvial Diamond ProjectIt is recommended that a base line and a grid be established and that mapping of the currentartisan activity be initiated before planning for a drill and pit sampling campaign to establish theextent of the alluvial deposits and their possible grade.12.3 The Bouro Kimberlite Dyke ProjectFrom work completed to date, particularly the high grade estimate for the Bouro North Dyke, itcan be concluded that larger scale bulk sampling followed by underground trial mining of theBouro North kimberlite dyke is justified and should be pursued as a high priority.12.4 The Bomboko Alluvial Diamond ProjectA global deposit grade of 4.06cpht is indicated from the bulk sampling and treatment to date;from historical results and personal observation it is our opinion that this grade is seriouslyundervaluing the deposit because of:(a)(b)(c)Over-mining, with too much dilution from both overburden and bedrock,Over-estimation of tonnes processed,The bottom screen size at 2.5mm is too large to capture the smaller stones.The quality and high average stone size of diamonds produced to date (US$121.59/ct and 0.549 cts/st,respectively) and therefore value is very encouraging with a gem to non-gem ratio of 53:47.Sampling results obtained from the previous operator, AA Mining needs to be combined with theWAD data to produce a comprehensive map of gravel location and grade distribution within thelicence area. Following the production of such a set of maps, an improved resource estimate canbe made and mining blocks and a mine plan can be created to guide bulk sampling.The single dump truck is insufficient to deliver adequate tonnage of gravels to the plant in ouropinion. The acquisition of one or more ADT’s is essential to the efficient bulk samplingoperation, particularly as stockpiles of gravel are required at the plant site to process through thewet season when mining is problematic.The present plant site is too far from the mining area in our opinion, adding not only to transportcosts but also to delivery time and truck utilization. A short-term solution is to sample cuts closerto the plant. In the longer term, the plant should be moved to a central location on the river flat.The trucks should be loaded directly from the bulk sample pit by the excavator, avoiding doublehandling at the pit site and saving the additional cost of an FEL.12.5 The Droujba Kimberlite & Alluvial Diamond ProjectExploration of the region has not found all of the probable dykes or pipes in the field. Furtherfollow-up by means of stream and loam KIM sampling is recommended.Field mapping of the alluvial diamond flats and terraces and artisan workings is required toaccurately assess the potential alluvial areas that remain to be explored.The geophysical results suggest that the Droujba pipe (blow) may be displaced to the south-west.Therefore, a series of inclined core drillholes, capable of drill depths of 400m, need to be implementedto evaluate the depth extent of this kimberlite occurrence and, by means of micro-diamond analysis ofcore samples, model the potential grade of the body. Subject to satisfactory drilling and microdiamondresults, it is also recommended that a surface bulk sample be collected and processed to determine themacrodiamond grade and value of the pipe.Trenching and pitting of the known dykes in the area should proceed to determine their(a) KIM mineral chemistry leading to an assessment of diamond carrying capacity and (b) Mini-bulksampling for micro-diamond analysis to estimate a range of potential macro-diamond grades.183

12.6 The Kono Kimberlite Dyke ProjectThe licence area has been thoroughly explored by stream, loam and rock sampling, by mappingof artisan activity and by airborne EM and there is a very low probability that further kimberlitedykes or pipes could still be discovered.The mineral chemistry results of dyke samples indicate that Lion Dykes 3 & 5 have the bestdiamond potential. The mini-bulk sampling indicates that Lion Dyke 5 (94 cpht) and the easternportion of Lion Dyke 1 (66 cpht) have the best indications of commercial potential of the dykessampled to date.The trial mining of Lion Dykes 5 (Bardu shaft) and 7 (Pol-K shaft) have shown that their fullydiluted, run-of-mine grades range between 28 and 38 cpht, that the average stone size is likely tobe 0.08 cts./stone. Note that the plant bottom screen size was 0.8mm, allowing the recovery ofstones weighing >0.0087cts. and this accounts for the large number of small stones and thereforethe very low average stone size. An increase in the bottom screen size to 1.5mm will lower thegrade but increase the average diamond size and average diamond value.From the relatively small amount of test mining, with 3,177.8cts valued at US$84.91 produced atthe Pol-K shaft and 855.6cts valued at US$51.84/ct produced from the Bardu shaft, it does notappear that either of these two better grade dykes are commercially viable under current marketconditions. This is why the project was placed on temporary care and maintenance by the partners;however, it is recommended that further test mining and evaluation of these shafts is required asprices improve before making a final decision as to their commercial potential. This should onlybe done once the recommended plant upgrade as to weightometers, bottom screen sizes and finalrecovery process have been installed.The principal author has been informed that in the Bardu shaft on the 45m level and 100m SWof the shaft, the dyke swells to a thickness of 3m and is thought to be a different kimberliteintrusive phase, with a grade of 140 cpht and an average diamond value of US$87.50 per carat inJune 2009. The extent, both vertically and laterally of this different kimberlite is unknown and ittherefore requires further definition and evaluation.The above diamond values are derived from actual sales by Stellar’s independent agents inAntwerp, through Natural Diamond Corporation, and in Dubai through Global Diamond Tenders.It is recommended that trial mining of Lion Dykes 1 (east) and Lion Dykes 7 (N.E. extension) andpossibly Lion Dyke 2 (N) be initiated to fully test their potential.The diamond recovery plant gives some cause for concern. There are no weightometers on theplant feed belts or on the waste picking belts and tonnes fed to the plant are estimated fromFEL loads. This has a serious effect on the calculation of grade, since an over-estimate of thetonnes treated results in an under-estimate of the grade. (I. Jones, 2009).The security and efficiency of the plant and particularly the final recovery section should besignificantly upgraded. (I. Jones, op cit).12.7 The Tongo Kimberlite Dyke ProjectThe licence area has been thoroughly explored by stream, loam and rock sampling, by mappingof artisan activity and by ground EM and there is a very low probability that further kimberlitedykes or pipes could still be discovered by further exploration.Dykes 1 & 4 have the best potential for producing commercial diamond grades of the order of100 cpht. with a high probability of producing occasional very large diamonds(Oosterveld, 2009).The Dyke 1 & 4 bulk sampling parcel of 183.4cts was valued by the government valuer for exportin November 2008 at an average of US$189/ct; The same parcel was valued by Stellar’s salesagent in Antwerp in November 2008 at US$124/ct, however on sale in May 2009, the parcel onlyfetched a price of US$61/ct. It is Stellar’s opinion that a current, conservative average value of184

US$100/ct could be applied to the Tongo production (Dykes 1 & 4 being valued by Stellar atUS$150/ct & US$50/ct respectively) based on the current price trend as illustrated in the firstgraph in section 9.All of the diamonds recovered in the bulk sampling were classed as gem quality.It is recommended that trial mining of Dykes 1 & 4 be initiated to further test their meritpreparatory to a decision as to the commercial potential of mining these dykes.13. Exploration BudgetThe Stellar and WAD management have prepared an exploration and evaluation program with a budgetestimate of project expenditure for the 24-month period from December 2009 to December 2011. Thedetailed budgets are summarized below in Table 40. Stellar/WAD have forecasted capital and operatingexpenditures of ~US$ 19.5 million, with the vast majority of those costs associated with the Mandala(US$6.7 million), Tongo (US$5.8 million) and Bomboko Projects (US$4.7 million)The work program, timing and cost estimates for each project are summarised as follows:Mandala Alluvial Project: Over the 24-month period from January 2010 to December 2011, continuebulk sampling after acquiring additional mining equipment, which is expected by management toproduce some 280,000cts from 329,000m 3 of gravel. Should these production expectations be met, andthe diamonds can continute to be sold at US$32/ct. (or better), then management believes they willbreak-even or produce a small net profit over the 24-month period after deduction of thecapital expenditure.Bomboko Alluvial Project: Over a 24-month period to December 2011, continue the bulk samplingprogram in March 2010, after upgrading equipment. Management is targeting to excavate and treat1,322,000 tonnes of gravel to produce 92,500cts of diamond, requires substantial improvement onpresently recovered grades of 4.06cpht to 7cpht. There are some compelling reasons to believe that this75 per cent. grade improvement may be attainable in our opinion, as discussed earlier. Should thediamonds continue to be sold for an average price of US$130/ct, this project could generate a substantialprofit of several million dollars.Tongo Kimberlite Project: Begin 1,000m of core drilling in March 2010 to define depth and lateralcontinuity of Dyke 1. After spending ~US$2 million in capital expenditure, begin to trial mine inJanuary 2011 by sinking a single shaft on Dyke 1 to produce 25,000 tonnes of kimberlite by December2011. Transport and treat this sample through the Kono plant, where based on current estimates of gradeof ~89cpht, it should produce 22,500cts, although management believes that a grade of 150cpht and38,500cts is attainable. Management believes that the parcel should fetch US$150/ct by Q4 2011 orQ1 2012. If all goes as per this optimistic scenario, and the 38,500ct.parcel is indeed sold at thepredicted price, then the net cost of this program could be as low as ~US$1 million from the overallbudget of US$5.8 million.Droujba Kimberlite Project: Between October 2010 and April 2011, carry out 3,000m of core drillingto define the lateral and depth extent of the kimberlite pipe. Between November 2010 and June 2011,de-water the flooded excavation and take a 1,000 tonne bulk sample and treat this through the mobile5tph DMS plant that is already on site. The parcel of diamonds produced from the bulk sampling willbe valued and retained. The total cost of the program is estimated to be ~US$1.6 million.Ouria Alluvial Project: Management intends to make as much usage of the nearby Mandalainfrastructure and equipment as possible on this project, and similarly with Bouro. The program firstcalls for the systematic collection and hand-jigging of small samples on a grid. Between March andJune 2010, select a bulk sample site for the excavation of 10,000m 3 of gravel for transport and treatmentthrough the Mandala plant. Based on present knowledge of grades management expects to produce~8,000cts by targeting a high-grade area of the deposit. Should the parcels be sold, and attain similarvalues as Mandala, then the project could break-even.185

Table 40: Summary 24 Month Budget (All figures are US$000’s)2010 2011 24 MonthQ1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY TotalMandala Alluvial ProjectCapex – $000s 625.0 62.0 0.0 0.0 687.0 0.0 0.0 0.0 0.0 0.0Opex – $000s 860.5 –––––––– 799.2 –––––––– 609.1 –––––––– 767.1 –––––––– 3035.9 –––––––– 816.7 –––––––– 750.0 –––––––– 612.9 –––––––– 813.6 –––––––– 2993.1––––––––Totals 1485.5 –––––––– 861.2 –––––––– 609.1 –––––––– 767.1 –––––––– 3722.9 –––––––– 816.7 –––––––– 750.0 –––––––– 612.9 –––––––– 813.6 –––––––– 2993.1 ––––––––6,715.96Ouria Alluvial ProjectCapex – $000s 19.1 10.1 29.2 0.0Opex – $000s –––––––– 156.2 –––––––– –––––––– –––––––– 156.2 –––––––– –––––––– –––––––– –––––––– –––––––– 0.0––––––––Totals 19.1 –––––––– 166.3 –––––––– 0.0 –––––––– 0.0 –––––––– 185.4 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 ––––––––185.43Bomboko Alluvial ProjectCapex – $000s 805.5 34.0 5.0 0.0 844.5 0.0 0.0 0.0 0.0 0.0Opex – $000s 456.7 –––––––– 549.5 –––––––– 394.9 –––––––– 499.9 –––––––– 1901.0 –––––––– 537.5 –––––––– 537.5 –––––––– 400.9 –––––––– 501.9 –––––––– 1977.8––––––––Totals 1262.2 –––––––– 583.5 –––––––– 399.9 –––––––– 499.9 –––––––– 2745.5 –––––––– 537.5 –––––––– 537.5 –––––––– 400.9 –––––––– 501.9 –––––––– 1977.8 ––––––––4,723.31Bomboko/Mandala roadCapex – $000s 168.5 –––––––– –––––––– –––––––– –––––––– 168.5 –––––––– –––––––– –––––––– –––––––– –––––––– 0.0––––––––Totals 168.5 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 168.5 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 68.49––––––––Alluvial Totals $000s 2,935.31 1,610.99 1,008.96 1,266.98 6,822.24 1,354.19 1,287.52 1,013.76 1,315.48 4,970.95 –––––––– 11,793.19–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Bouro Kimberlite ProjectCapex/Opex – $000s 8.9 –––––––– 88.1 –––––––– 4 –––––––– 0 –––––––– 101 –––––––– 5 –––––––– 0 –––––––– 0 –––––––– 0 –––––––– 5––––––––Totals 8.9 –––––––– 88.1 –––––––– 4.0 –––––––– 0.0 –––––––– 101.0 –––––––– 5.0 –––––––– 0.0 –––––––– 0.0 –––––––– 0.0 –––––––– 5.0 ––––––––106.00Droujba Kimberlite ProjectCapex/Opex – $000s 6.5 –––––––– 1.5 –––––––– 226.8 –––––––– 597.3 –––––––– 832.1 –––––––– 605.8 –––––––– 163.3 –––––––– 0 –––––––– 0 –––––––– 769.1––––––––Totals 6.5 –––––––– 1.5 –––––––– 226.8 –––––––– 597.3 –––––––– 832.1 –––––––– 605.8 –––––––– 163.3 –––––––– 0.0 –––––––– 0.0 –––––––– 769.1 ––––––––1,601.20Tongo Kimberlite ProjectCapex – $000s 621.7 1,350.3 3.0 3.0 1978.0 13.0 3.0 3.0 3.0 22.0Opex – $000s 112.7 –––––––– 538.9 –––––––– 276.9 –––––––– 451.9 –––––––– 1,380.3 –––––––– 575.0 –––––––– 682.0 –––––––– 510.5 –––––––– 646.4 –––––––– 2,413.9––––––––Totals 734.3 –––––––– 1889.2 –––––––– 279.9 –––––––– 454.9 –––––––– 3358.3 –––––––– 588.0 –––––––– 685.0 –––––––– 513.5 –––––––– 649.4 –––––––– 2435.9 ––––––––5,794.25Kono Kimberlite ProjectTotal c&m costs pm 80.7 –––––––– 17.2 –––––––– 17.2 –––––––– 17.2 –––––––– 132.4 –––––––– 50.4 –––––––– 17.2 –––––––– 17.2 –––––––– 17.2 –––––––– 102.0 –––––––– 234.40––––––––Kimberlite Totals $000s 830.49 1,996.00 –––––––– 527.89 1,069.44 4,423.83 1,249.17 865.49 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 530.71 –––––––– 666.65 3,312.03 7,735.85–––––––– ––––––––186

Bouro Kimberlite Project: Between March and June 2010, excavate a 1,000tonne mini-bulk samplefrom the Bouro North Dyke and treat it through the Mandala plant to obtain more credible data on bothgrade and value. The estimated cost of this sampling is US$106,000.Kono Kimberlite Project: The project is presently forecast to remain on care and maintenance toDecember 2011 at a cost of US$234,000, unless there are substantial improvements in the diamondmarket which would be the impetus to restart trial mining.Other: Improve the 71km gravel road between Mandala and Bomboko projects in February and March2010 at a cost of US$169,000.Although the improvements and therefore grade and revenue expections of management at theBomboko operation are deemed optimistic by MPH, as are management’s expectations for Tongo, wedo feel that these programs will achieve all of the technical exploration and evaluation objectivesrecommended in this report. MPH therefore endorses the planned further exploration of the projects asbudgeted by the Stellar and WAD management, with the proviso that the availability of additionalfunding would eliminate a substantial amount of the operational risks. In particular it would bepreferable for the Company not to sell parcels from bulk sampling programs as they’ll be needed forfurther technical and bankable studies.14. Date and Signature PageThe effective date of this technical report is 23 December, 2009.The Qualified Person responsible for the preparation of all sections of this report is Mr. Peter W.A.Walker, with Mr. Paul A. Sobie co-author.The undersigned, Peter W.A. Walker, contributed to all sections of this TechnicalReport, titled “Competent Person’s Report on a Portfolio of Diamond Exploration Properties inSierra Leone and Guinea, West Africa for Stellar Diamonds Limited, West African Diamonds plcand the RBC Capital Markets” with an effective date of 23 December 2009.The format and content of the report are intended to conform to the London Stock Exchange,Alternative Investment Market’s “Note for Mining and Oil & Gas Companies – June 2009”.Signed,Peter W.A. Walker, 2009.The undersigned, Paul Sobie, contributed to all Sections of this technical report,Titled “Competent Person’s Report on a Portfolio of Diamond Exploration Properties in SierraLeone and Guinea, West Africa for Stellar Diamonds Limited, West African Diamonds plc and theRBC Capital Markets” with an effective date of 23 December 2009.The format and content of the report are intended to conform to the London Stock Exchange,Alternative Investment Market’s “Note for Mining and Oil & Gas Companies – June 2009”.Signed,Paul A. Sobie, 2009.187

15. Qualified Persons’ CertificatePeter WalkerI, Peter W.A. Walker, B.Sc.(Hons) Geology, M.B.A., Pr. Sci. Nat., as an author of this report titled“Competent Person’s Report on a Portfolio of Diamond Exploration Properties in Sierra Leoneand Guinea, West Africa for Stellar Diamonds Limited, West African Diamonds plc and the RBCCapital Markets” with an effective date of 23 December 2009, do hereby certify that:1. I am an independent Consulting Geologist conducting work under the auspices ofVP3 GeoServices (Pty) Ltd of – Office 4 Conberg House, 5 Dreyersdal Road, Bergvliet 7945.South Africa.Tel: +27 (21) 712 3826 Cell: +27 (72) 411 1108 e-mail: paw@vp3.co.za2. I graduated with a Bachelor of Science (Hons.) degree in Geology in 1972 and an MBA in 1982,both from the University of Cape Town, South Africa.3. I am a Professional Geologist registered with the South African Council for Natural ScientificProfessions, registration No.400064/99;4. I have worked as a geologist for a total of 30 years since my graduation from university. Myrelevant experience for the purposes of this Technical Report is:• Seven years (1995 – 2002) as exploration manager for first Trans Hex International Ltdand then Group exploration manager for Trans Hex Group, engaged in the assessment ofnew alluvial and kimberlite diamond projects, their exploration and management throughto production.• Two years as an independent consultant (2002 – 2004) advising and writing competent personreports for exploration & mining companies engaged in alluvial diamond exploration.• Two years as exploration manager (2004 – 2006) for Tsodilo Resources Ltd engaged inkimberlite exploration in N.W. Botswana.• Three years as Chairman of VP3 Geoservices (Pty) Ltd, an independent geological consultingcompany engaged in advising and writing competent person reports for exploration andmining companies, specializing in alluvial and kimberlite diamond exploration.5. I have read the definition of a “competent person” as set out in the “Note for Mining, Oil and GasCompanies”, of June 2009 prepared by the AIM regulators and certify that by reason of myeducation, experience in alluvial diamond exploration and mining and my affiliation with aprofessional association I fulfill the requirements to be a “competent person” for the purpose ofpreparing this Competent Person’s Report.6. I am responsible for writing all sections of this independent technical review report.7. I visited the sites described in this report between 30 October and 12 November 2009.8. In July 2004 and again in July 2007, I visited and wrote a competent person report on the alluvialprojects on the Mandala and Ouria Rivers and the Bouro kimberlite dyke project described inthis report.9. As of the date of this certificate, to the best of the qualified persons knowledge, information andbelief, the technical report contains all scientific and technical information that is required to bedisclosed to make the technical report not misleading.10. I am independent of the Issuers, Stellar Diamonds Limited and West African Diamonds plc,applying all of the standard tests of independence.188

11. I have read the “Note for Mining, Oil and Gas Companies”, of June 2009 prepared by theAIM regulators and this Technical Report has been prepared in compliance with the minimumcontent requirements of a Competent Persons Report as set out in Appendix 2 of their Note.Dated: 23 December 2009P.W.A.WALKER B.Sc. (Hons.) MBA Pr. Sci. Nat.189

Co-Authors’ CertificatePaul A. SobieI, Paul A. Sobie B.Sc., P.Geo., as an author of this report titled “Competent Person’s Report on aPortfolio of Diamond Exploration Properties in Sierra Leone and Guinea, West Africa for StellarDiamonds Limited, West African Diamonds plc and the RBC Capital Markets” with an effectivedate of 23 December 2009, do hereby certify that:1. I am a Professional Geologist, residing at 179 Guelph Street, Rockwood, Ontario, Canada;2. I am a member in good standing of the Association of Professional Geoscientists of Ontario,Member No. 0374;3. I am a graduate of Laurentian University, Sudbury, Canada with a B.Sc. (Hons.) degree in geologyin 1987;4. I have been employed continuously from 1987 as a geologist with MPH Consulting Limited, andfrom 1993 to 2006, as managing director of MPH Consulting Botswana (Pty) Ltd, a subsidiarycompany, located in Gaborone, Botswana.5. I am an officer and director of MPH Consulting Limited (“MPH”) of Toronto, the parent company;6. My relevant experience for the purposes of this Technical Report is a total of twenty-one years ofdirect experience with diamond projects in Canada, the Russian Federation and Africa, includingmanagerial responsibilities for all manner of projects ranging from conceptual grassrootsexploration through to feasibility studies on advanced projects. Additional diamond experiencehas included independent valuations and production audits on producing mines, as well asverification/audit work for parties completing due diligence and/or participating in joint ventures;7. I have read the definition of a “competent person” as set out in the “Note for Mining, Oil and GasCompanies”, of June 2009 prepared by the AIM regulators, and certify that by reason of myeducation, experience in alluvial and kimberlite diamond exploration and mining and myaffiliation with a professional association I fulfill the requirements to be a “competent person”for the purpose of preparing this Competent Person’s Report;8. I contributed to writing all sections of this independent technical review report;9. I did not visit the properties;10. In January 2007, and again in July 2007, I contributed to writing a competent person report onthe alluvial and Bouro kimberlite dyke properties described in this report;11. As of the date of this certificate, to the best of the qualified persons knowledge, information andbelief, the technical report contains all scientific and technical information that is required to bedisclosed to make the technical report not misleading;12. I am independent of the Issuers, Stellar Diamonds Limited and West African Diamonds plc,applying all of the standard tests of independence.13. I am the former (resigned 31/12/2008) Chief Executive Officer and Managing Director ofSiberian Diamonds Limited, a private company exploring for diamonds in the Russian Federation.Siberian Diamonds Limited shares a director with Stellar Diamonds Limited, Mr. Guido Pas, whois an Executive Director of Siberian, and Non-Executive Chairman of Stellar.14. I have read the “Note for Mining, Oil and Gas Companies”, of June 2009 prepared by the AIMregulators and this Technical Report has been prepared in compliance with the minimum contentrequirements of a Competent Persons Report as set out in Appendix 2 of their Note;23 December 2009PAUL A. SOBIE B.Sc., P.Geo.190

16. Reference & Bibliography ListAIM June 2009. Note for Mining, Oil and Gas Companies, London Stock Exchange plc, AlternativeInvestments Market.Allan, James. 2009 Presentation – “Quo Vadis – The Outlook for Diamond Supply & Demand”,presentation to the Botswana Resource Conference, Gaborone. Available from www.allanhochreiter.co.zaAnderson, K., 2008. A DIGHEM and magnetic survey over the Droujba kimberlite pipe for FriendshipDiamonds SARL.CIA World Factbook, 2004. www.cia.gov/cia/publications/factbook/geos/gv.htmlDiatchenko, V et al., 1961-1962, Russian Geological Mission in the Republic of Guinea. Report on theresearch activities and prospecting work conducted on gold, diamonds & limestone with the technicalassistance of Russian geologists. Translated to English by Mano River Resources in 2006. Ministry ofMines and Geology of the Republic of Guinea, Conakry.Elford K. & Acheson D. Dec 2006. Competent Person’s Report on the Mineral Assets in GuineaSoumbaya & Fangamadou Areas. Behre Dolber International Limited.Elford K. & Acheson D. Dec 2006. Competent Person’s Report on the Mineral Assets in Sierra Leone,Kono Region, Eastern Sierra Leone. Behre Dolber International Limited.Elford K. & Acheson D. August 2008. The Mineral Assets in Guinea and Sierra Leone. Behre DolberInternational Limited. Unpublished internal Report for West African Diamonds plc.Hall P.K. 1969. Bulletin 5, Geological Survey of Sierra Leone. The Diamond Fields of Sierra Leonevol 1 133pgs.Jones I., March 2009. Metallurgical Report on the Kono Plant. Metco Global Consultants. InternalCompany report for Basama Diamonds Pty Ltd.McGeorge I.B. and Sobie P.A., 2007. Technical Report on the Bouro Diamond Properties, Republicof Guinea, for Guinea Diamond Corporation. Competent Person Report by MPH Consulting,Toronto, Canada.Munyawiri D.T., Jan 2008. Geophysical Survey of the Droujba Kimberlite – Guinea 2007. DedelaMining Consultants. Unpublished West African Diamonds Company report.NKS Consulting 2003a. Report on the Bouro Kimberlite Project of De Beers. Report NKS149.NKS Consulting 2004. Final Report on the Due Diligence of the Bouro Kimberlites in South EastGuinea. Report NKS153.Oosterveld M.M., 2007. Report on the Bouro Kimberlites, South East Guinea. Unpublished StellarCompany report.Oosterveld M.M., Sept. 2007. Report on micro diamonds recovered from dykes in the Tongo licensearea, Sierra Leone. Unpublished Stellar Company report.Oosterveld M.M., June 2009. Report on the Tongo kimberlite dykes, Sierra Leone – Dyke 1 and Dyke4 Analysis of size frequency and valuation results. Unpublished Stellar Company report.Oosterveld M.M., 2009. Report on the Kono Kimberlite Dykes, Sierra Leone: Shafts Pol-K and Bardu– Analysis of size frequency and valuation results. Unpublished Stellar Company report.Rombouts, L. 1987. Geology and Evaluation of the Guinean Diamond Deposits. Annales de la Sociétégéologique de Belgique. Vol 110, 241-259.Skinner, E.M.W., Apter, D.B., Morelli, C. and Smithson, N.K. 2004. Kimberlites of the Man Craton,West Africa. Lithos 76, 233 – 259.191

Sobie P.A. and McGeorge I.B., 2008. A report to NI 43-101 standards on the diamond properties heldby Mano River Resources Inc. in Liberia, Sierra Leone and Guinea, West Africa. MPH Consulting Ltd.,Toronto, Canada.South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves.The SAMREC Code. 2006 edition.Sutherland D.G., 1989. Mandala – N’Kéléyani: Évaluations des Alluvions. (2 volumes), Report for StarGuinée by Placer Analysis Ltd.Sutherland, D.G. 1993. The Diamond Deposits of the Mandala Basin, SE Guinea, West Africa.Transactions of the Royal Society of Edinborough: Earth Sciences, 84, 137-149.Sutherland, D.G. 2004. Report, for SouthernEra Diamonds Inc., on SearchGold Resources’ MandalaProject, Guinea.Sutherland, D.G. May 2007. The Diamond Deposits in and around Bounoudo, SE Guinea. PlacerAnalysis Ltd. Unpublished internal Report for West African Diamonds.Tysdal, R.G. and Thorman, C.H. 1983. Geologic Map of Liberia. U.S. Geological Survey and LiberianGeological Survey.Villeneuve, D. 2000. Les gîtes de diamants alluvionnaires Mandala et N’Kéléyani, République deGuinée, Afrique de l’Ouest. (report for Ressources SearchGold Inc. by RDV Inc., Laval, Québec)Walker, P.W.A. 2004. Preliminary feasibility study report on the Mandala and Ouria River AlluvialDiamond Projects of SearchGold Resources Inc., Guinea, West Africa.Walker, P.W.A. & Martinez, I, October 2008. Independent Technical Review of the Alluvial DiamondMining Blocks Mandala River Project, Guinea, West Africa. VP3 Geoservices (Pty) Ltd – UnpublishedStellar Company report.Walker, P.W.A. & Sobie, P.A., April 2008. National Instrument 43-101 Technical Report Prepared on theDiamond Mining & Exploration Properties in Guinea, West Africa for Stellar Diamonds Limited,Panmore Gordon (UK) Limited and GMP Securities Europe LLP. MPH Consulting Limited.Wyndham C. June 2009. “Where is the Good News?” A presentation to the Botswana Resource SectorConference, Gaborone, Botswana.www.nationsencylopedia.comwww.brittanica.com192

17. Glossary of Geological & Mining TermsADT’sArticulated Dump Trucks.AEM or AirborneElectromagnetic SurveyamslAlluvialAlterationAmphiboliteArchaenArtisan MinersBankha DrillbmslBulk samplingCarat (ct.)Carats per hundred tonnes “cpht”ConcentrateConglomeratesColluvialCratonRefers to an electrical geophysical survey method wherebyan electric current is passed through a coil resulting in amagnetic field which induces a response from the earthimmediately below the coil. AEM refers to a survey readfrom an instrument carried in a moving aircraft.Above mean sea level.A descriptive term used to classify a detrital deposit asbeing deposited in a stream or river.Changes in the mineralogical composition of a rocktypically brought about by the action of hydrothermal(hot water) solutions.A crystalline rock consisting largely of amphibole andplagioclase feldspar.A time period extending from the creation of the earth tosome 2,500mya.Small scale manual diamond miners, usually workingpart-time when farming chores or seasons are lessdemanding of their time.A type of drill consisting of a tubular drill bit, equippedwith a non-return flap valve to retain a sample, which isdriven into unconsolidated material at the end of a drillstring or drill wire.Below mean sea level.A descriptive term used to imply a large volume samplethat is processed in order to determine the grade of adeposit where mineralization is unevenly distributed andof low grade within the deposit. Bulk sampling is invokedto overcome the “nugget effect”.A unit used to weigh diamonds. The international metriccarat is 200mg.Is the number of carats (weight) of diamonds per hundredtonnes of material mined. See also “Grade”.The result of a mechanical process in which diamonds(or some other desired mineral) that is heavier than thegeneral minerals in the sample is “concentrated” into asmaller volume of material called “concentrate”.Rounded, water-worn fragments of rock or pebblescemented by another substance.angular fragments of rock and weathered materialtransported partially by water, but close to their source rock.A relatively immobile part of the earth’s crust, generally oflarge size and at least 2.5 billion years old.193

CretaceousCuttable RoughDeflationDeltaicDense Media Separation (DMS)DevonianDiamond DrillingDiamondiferousDykeEmplacementElluvialEn EchelonFEL’sFluvialFlowsort x-ray diamond sorterGeographic InformationSystems (GIS)Geographic PositioningSystem (GPS)A time period extending from 80 to 120 million yearsbefore the present time.Those rough diamonds which because of their good crystalshape can be cut into two smaller diamonds without muchloss of weight. It is reasonable to expect the two polishedportions to retain 50 per cent. of the rough carat weight.The removal of lighter particles from a land surface by theaction of wind, leaving a surface layer composed of larger,heavier particles.A term used to describe those sediments deposited in thedelta of a stream or river as opposed to alluvial, lagoonalor marine.The process of using a dense media, such as Ferro-silicon,to separate high specific-gravity minerals from lowspecific-gravity minerals.A geological time period extending from 417 to 354 my ago.Using a synthetic diamond impregnated drill bit and a corebarrel to drill into rocks and to obtain a continuous coresample of them.An adjective describing any substance containing diamonds.An intrusive rock exploiting a fracture zone so that theresultant rock forms a near-vertical dyke-like body.The development of an ore body in a particulargeological environment. To place the ore deposit by anygeological process.Fragmental material accumulated in place or very near totheir bedrock source; the fragments have not beentransported by the agency of water.Ladder-like, or step like: used to describe faults or dykeswhich are parallel and off-set from each other, so that oneends and the other starts parallel to it.Front-end loaders.Produced by the action of a stream or river.A common make or brand of diamond sorter. Diamondsfluoresce under an X-ray beam and this property is used topick them off of a moving belt.A computerized system for capturing, storing, analysing,displaying and manipulating geographical and geologicalinformation which is spatially referenced to the earth.A hand-held computerized system for navigation using aconstellation of earth orbiting satellites that providesinformation as to location, elevation and speed ofmovement across the earth’s surface.194

GneissGrabenGradeGraniteGravelHardrockIKONOS satellite imageryInterbeddedIntersectedIntersectionKimberliteKimberlite Indicator Minerals(“KIM’s”)LineamentLithologymybpMakeable roughA Granitic rock that has been subjected to tectonism andmetamorphism, resulting in an alignment and segregationof minerals, particularly micas so that a distinct foliartexture is imparted to the rock.A structural term used to describe a valley bounded onboth sides by vertical or near-vertical tensional faulting. Arift valley is one example of a graben structure.In economic geology, the term is used to express therelative quantity of an ore in a rock or unconsolidatedsediment mass; in diamond exploration it is commonlyexpressed as carats per hundred tonnes (cpht) or carats percubic metre (cts/m 3 ).A deep-seated, coarse-grained intrusive rock composedof alkalic feldspar, quartz and accessory minerals (suchas biotite).An accumulation of rounded, water-worn pebbles.A descriptive term used to distinguish igneous andmetamorphic rocks from sedimentary rocks, but oftenloosely used to distinguish between lithified andunlithified sediments.A brand or make of high-resolution satellite true-colourphotography.An adjective describing something that is situated betweenbeds of rock.An adjective describing the process whereby a strata orbed of rock is found in a borehole or drill hole.The noun describing the position at which a specific, usuallymineralized, rock unit is located in a borehole or drill hole.A variety of carbonated alkali peridotite; intrusive rocks ofdeep mantle origin typically occurring as narrow pipes orfissures and are the main primary source of diamonds.There are specific varieties of minerals which are unique tokimberlites, among which pyrope garnet, ilmenite andchrome diopside are commonly used by explorationgeologists to find buried kimberlites. KIM stream or loamsampling involves taking a large sample and thenconcentrating out the heavy minerals which are examinedunder a microscope – any KIM’s are picked out and counted.Significant lines of landscapes that reveal the architectureof the rock basement.The physical character of the rock; a description of therock’s character.Million years before the present time.is a term used to describe those rough diamonds that caneasily be cut and polished into the common finisheddiamond shapes, without losing too much of the original,rough carat weight.195

MarbleMesozoic ageMicrodiamond analysisMineral ResourcesMineralizationMineralization modelMioceneOpen hole percussion drillingOutcropOverburdenPaleo- or Palaeo-PleistocenePliocenePlunge poolsPre-Cambrian ageA metamorphic (changed) rock composed dominantly ofcalcite and/or dolomite.A division of geologic time; from 180 to 30 million yearsbefore the present.A laboratory process whereby small samples of kimberlitecan be completely digested leaving only a residue ofdiamonds, usually microscopic in size. By relating thenumber and size of micro-diamonds to the sample weightand comparison to distribution curves, an estimate of thepossible macro-diamond grade of the sampled kimberlitecan be made.Most commonly accepted codes for the classification andreporting of mineral deposits defines a mineral resource asa concentration of material of intrinsic economic interestin such form and quantity that there are reasonableprospects of eventual economic extraction.The process of formation of a mineral.A geological model used by geologists to assist them inunderstanding both the mechanisms of emplacement, andthe possible location of ore deposits for the commodity/iesbeing investigated.A time period extending from 18 to 19 million yearsbefore the present.A process using a vibrating drill-bit that breaks the rock atthe bottom of the drill hole. The coolant fluid (air, water,foam, etc) circulates down through the drill rods and thebit and returns up the borehole carrying the drill cuttings.These cuttings are collected at surface for logging,analyses, etc.The exposure of bedrock projecting through the overlyingcover of detritus and soil.The overlying cover of whatsoever nature over usefulmaterials or ores.A prefix denoting old, ancient, fossil, early, or primitive.A time period extending from 2 to 3 million years beforethe present.A time period extending from 3 to 5 million years beforethe present.The term used to describe the hole eroded into the bedrockat the base of a waterfall. Plunge pools are often associatedwith exit ramps, which together form excellent trapstructures for alluvial diamonds.One of the major divisions of the earth’s time-scale; allgeological events that pre-dated 520 million before thepresent are of Precambrian age; the Precambrian agelasted for some 3,500 million years.196

ProvenanceThe terrain or parent rock from which any association ofsediments was derived.Quartz A mineral composed of silicon dioxide (SiO 2).Quaternary periodRegolithRC or Reverse Circulation DrillingReserve/sReworkingSaproliteSchistScour poolsSectionSediment/sSieve sizesSpecific Gravity “S.G.”StrataboundThe period of time from 2 million years ago to the present.The layer of loose rock and soil that covers theunderlying rock.A process using a vibrating drill-bit that breaks the rock atthe bottom of the drill hole. The coolant fluid (air, water,foam ,etc) circulates down through the outer section of thedouble walled drill rods to the bit and returns up the innersection of the drill rods carrying the drill cuttings. Thesecuttings are collected at surface for logging, analyses, etc.Because of the sample collection just above the bit, thesamples are less contaminated than samples fromopen-hole percussion drillholes.Refers to known ore deposits that are being or may beeconomically mined/exploited.The process whereby previously deposited sediment issorted further.is the residual clays and silts derived from bedrockweathering in situ.A metamorphosed rock having a preferential alignment ofMicaceous minerals which imparts a strong foliationtexture to the rock.deeply eroded, large-scale potholes in the channel bed ofthe river. This is often the term used to describepaleo-waterfall plunge pools.An imaginary line across a geological structure ororebody, along which holes are drilled, plans drawn orother activities carried out.Solid material settled from a suspension in a liquid or gas.Sieve sizes are quoted as either the size of the opening(square or round) in mm or microns (μ) or the number ofopenings per inch. The Diamond Trading Company (DTC)uses sieve sizes to grade diamonds by size fraction.DTC #1 sieve has a round aperture diameter of 1.09mmand a 0.013ct stone will be retained. To convert mm screensizes to carats retained apply the formula: d(mm)= (cts ÷0.0107)^0.333 (where “d” is the sieve diameter).The specific gravity of a substance is a comparison of itsdensity to that of water which by definition in the metricsystem has a density of 1. Diamond has an S.G. of 3.52and is therefore “heavier” than most rock formingminerals, for example quartz, with an S.G. of 2.65.An adjective indicating that the subject of the sentence isconfined within the encompassing strata (layers of rock).197

StratigraphicStrike lengthTerrace/sTertiary periodPertaining to stratified rocks; those rocks which wereformed or are lying in beds, layers or strata.Pertaining to the direction of the strike of the rocks; thatdirection which forms a horizontal line over the surface of aninclined plane within the fabric of the rock mass, which maybe a bedding, joint, fault, cleavage, or other structural plane.Relatively flat, horizontal or gently inclined surfaces,sometimes long and narrow, which are generally boundedby a steeper ascending slope on one side, and by a steeperdescending slope on the opposite side. Both forms whentypically developed are step like in character.A division of geological time extending from 29 million to2 million years before the present.Ton An Imperial unit of weight equivalent to20 hundredweights or 2240 pounds or 1.016047 tonnes.TonneTraverseTriassicA metric unit of weight equivalent to 1000 kilograms.An imaginary line across a geological feature.A division of geologic time extending from 248 to206my ago.198

APPENDIX ASUMMARY TABLE OF STELLAR PROPERTIES HELD IN GUINEALicenceAsset Name Licence No Holder Stellar Interest Type of Licence Expiry Date Area km 2 CommentsMandala A2008/3640 Societe Ressources 100% Semi-industrial diamond mining 25 Sept. 2013 14.00 Bulk Sampling in ProgressMandala Guinée SarlOuria A2008/3639 Societe Ressources 100% Alluvial diamond exploration 25 Sept. 2010 16.00 Bulk Sampling program scheduledMandala Guinée Sarl to begin March 2010Bouro I A2005/1767 Mano River Diamant 100%, but 2% royalty to Kimberlite diamond exploration 5 May 2009* 65.00 Renewal Applications lodged onGuinée De Beers reduced areasBouro II A2005/1768 Mano River Diamant Guinée 100%, but 2% royalty to Kimberlite diamond exploration 5 May 2009* 65.00 Renewal Applications lodged onDe Beers reduced areasBouro III A2005/1769 Mano River Diamant Guinée 100%, but 2% royalty to Kimberlite diamond exploration 5 May 2009* 68.00 Renewal Applications lodged onDe Beers reduced areasDroujba I A2007/1290 Friendship Diamond Guinée 100% Kimberlite diamond exploration 27 March 2009* 98.00 Renewal Applications lodged onreduced areasDroujba II A2007/1290 Friendship Diamond Guinée 100% Kimberlite diamond exploration 27 March 2009* 181.00 Renewal Applications lodged onreduced areas* Renewal applications have been made & should be grantedSUMMARY TABLE OF WAD PROPERTIES HELD IN GUINEALicenceAsset Name Licence No Holder WAD Interest Type of Licence Expiry Date Area km 2 CommentsBomboko A2005/1211 African Diamonds plc 100% Semi-industrial diamond mining Mar 2010 7.00 Bulk Sampling in progressBomboko A2009/2667 Castlebay Resources Ltd 100% but 3% royalty due Semi-industrial diamond mining Oct 2014 8.00 Exploration plannedto vendors of CastlebayBomboko A2009/2666 Castlebay Resources Ltd 100% but 3% royalty due Alluvial diamond exploration Oct 2011 2.25 & 5.6 Exploration planned(now split into to vendors of Castlebay2 blocks)Bomboko A2009/2665 MacGregor Crowe Ltd 100% but 3% royalty due Alluvial diamond exploration Oct 2011 6.2 Exploration plannedto vendors of the licenceDroujba A2007/820 West African Diamonds plc 100% Alluvial diamond exploration 1 March 2009* 22.0 Exploration planned* Renewal applications have been made & should be granted199

SUMMARY TABLE OF STELLAR PROPERTIES HELD IN SIERRA LEONELicenceAsset Name Licence No Holder Stellar Interest Type of Licence Expiry Date Area km 2 CommentsKono EXPL 3/05 Basama Diamonds 49% Diamond Exploration 31 January 2011 103 Trial Mining on care & maintenanceProject I (Sierra Leone) Ltd awaiting recovery of diamond pricesKono EXPL 4/05 Basama Diamonds 49% Diamond Exploration 31 January 2011 103 Trial Mining on care & maintenanceProject II (Sierra Leone) Ltd awaiting recovery of diamond pricesTongo EXPL 5/07 Sierra Diamonds 100% Diamond Exploration 16 August 2011 33.12 Trial Mining scheduled for 2010Project (Sierra Leone) LtdSUMMARY TABLE OF WAD PROPERTIES HELD IN SIERRA LEONELicenceAsset Name Licence No Holder WAD Interest Type of Licence Expiry Date Area km 2 CommentsDump 11 ML 1/04 West African Diamonds plc 5% net smelter royalty Mining Licence 23 Mar 2012 2.17 From 16 Oct 2009, Pyramidbut transfer to Pyramid Resources will operateResources in progressEPL 11/2002 African Diamonds plc 5% net smelter royalty Gold & Diamond Prospecting This licence is being held in trust awaiting reduction to threeLicence smaller areas & its’ being changed to an Exclusive ProspectingLicence and then transfer to Pyramid ResourcesPipe 3 EXPL 8/02 West African Diamonds plc 20% free carried to Exploration Licence 1 Dec 2010 67.64 From 16 Oct 2009, Thunderball Ptybut transfer to Thunderball production Ltd will operatein progress200

APPENDIX BMINING BLOCKS WITH ESTIMATED TONNES OVERBURDEN, GRAVEL & DIAMOND PRODUCTIONBLOCK MAP 1: MANDALA NORTHERN BLOCKSBlock O/Burden Est.O/B Gravel Est.Gravel GravelSurface Thickness Volume O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area sq.m. m. cu.m. S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats221 10,000 3 30,000 2 60,000 0.875 8,750 2 17,500 0.16 1,400222 10,000 2.25 22,500 2 45,000 0.5 5,000 2 10,000 0.625 3,125223 10,000 4 40,000 2 80,000 1.6 16,000 2 32,000 1.21 19,360224 10,000 3.975 39,750 2 79,500 0.75 7,500 2 15,000 5.91 44,325225 10,000 4.45 44,500 2 89,000 1.15 11,500 2 23,000 1.875 21,563226 10,000 1 10,000 2 20,000 0.5 5,000 2 10,000 1.4 7,000---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 60,000 ---------------------- 186,750 ---------------------- 373,500 ------------------------- 53,750 ---------------------- 107,500 ---------------------- 96,773----------------------230 10,000 5 50,000 2 100,000 1.1 11,000 2 22,000 0.1 1,100231 10,000 3.05 30,500 2 61,000 0.8 8,000 2 16,000 0.36 2,880232 10,000 3.7 37,000 2 74,000 1.45 14,500 2 29,000 0.625 9,063233 10,000 4.8 48,000 2 96,000 1.35 13,500 2 27,000 1.53 20,655234 7,500 4.5 33,750 2 67,500 0.75 5,625 2 11,250 1.21 6,806---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 47,500 ---------------------- 199,250 ---------------------- 398,500 ------------------------- 52,625 ---------------------- 105,250 ---------------------- 40,504----------------------239 10,000 1 10,000 2 20,000 0.75 7,500 2 15,000 0.08 600240 10,000 5 50,000 2 100,000 0.9 9,000 2 18,000 0.2 1,800241 10,000 4.5 45,000 2 90,000 1 10,000 2 20,000 0.36 3,600242 10,000 4.5 45,000 2 90,000 1 10,000 2 20,000 0.36 3,600243 10,000 0.5 5,000 2 10,000 0.5 5,000 2 10,000 0.6 3,000244 4,500 0.5 2,250 2 4,500 0.5 2,250 2 4,500 0.6 1,350---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 54,500 ---------------------- 157,250 ---------------------- 314,500 ------------------------- 43,750 ---------------------- 87,500 ---------------------- 13,950----------------------201

Block O/Burden Est.O/B Gravel Est.Gravel GravelSurface Thickness Volume O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area sq.m. m. cu.m. S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats246 10,000 3.5 35,000 2 70,000 0.5 5,000 2 10,000 0.2 1,000247 10,000 3.25 32,500 2 65,000 0.5 5,000 2 10,000 1 5,000248 10,000 5.75 57,500 2 115,000 1 10,000 2 20,000 0.1 1,000249 10,000 4 40,000 2 80,000 1.4 14,000 2 28,000 0.45 6,300250 10,000 4.15 41,500 2 83,000 1 10,000 2 20,000 0.2 2,000251 10,000 4.5 45,000 2 90,000 0.5 5,000 2 10,000 0.2 1,000252 10,000 0 0 2 0 0 0 2 0 0.5 0---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 70,000 ---------------------- 251,500 ---------------------- 503,000 ------------------------- 49,000 ---------------------- 98,000 ---------------------- 16,300----------------------257 10,000 3.5 35,000 2 70,000 1 10,000 2 20,000 0.92 9,200258 10,000 3.85 38,500 2 77,000 1.1 11,000 2 22,000 0.36 3,960259 10,000 1 10,000 2 20,000 0.5 5,000 2 10,000 0.36 1,800---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 30,000 ---------------------- 83,500 ---------------------- 167,000 ------------------------- 26,000 ---------------------- 52,000 ---------------------- 14,960----------------------264 10,000 3.7 37,000 2 74,000 1.95 19,500 2 39,000 0.1 1,950265 10,000 4.15 41,500 2 83,000 0.9 9,000 2 18,000 0.36 3,240266 10,000 4.4 44,000 2 88,000 0.95 9,500 2 19,000 0.6 5,700267 10,000 3.5 35,000 2 70,000 0.95 9,500 2 19,000 0.36 3,420---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 40,000 157,500 315,000 47,500 95,000 14,310---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------272 10,000 2.7 27,000 2 54,000 0.9 9,000 2 18,000 0.6 5,400273 10,000 2.75 27,500 2 55,000 1.9 19,000 2 38,000 0.16 3,040---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Totals 20,000 54,500 109,000 28,000 56,000 8,440---------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------Grand Totals 322,000 1,090,250 2,180,500 300,625 601,250 205,236------------------------- ---------------------- ------------------------- ---------------------- ---------------------- ----------------------202

MINING BLOCKS WITH ESTIMATED TONNES OVERBURDEN, GRAVEL & DIAMOND PRODUCTIONBLOCK MAP 2: N’KELEYANI RIVER BLOCKSBlock Gravel Est.Gravel GravelSurface O/Burden Est.O/B O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area Thickness Volume S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats34 10,000 0.25 2,500 2 5,000 0.7 7,000 2 14,000 0.16 1,12035 10,000 1.4 14,000 2 28,000 0.75 7,500 2 15,000 0.36 2,70036 10,000 2.15 21,500 2 43,000 0.7 7,000 2 14,000 0.4 2,800––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 30,000 ––––––––––––– 38,000 ––––––––––––– 76,000 ––––––––––––– 21,500 ––––––––––––– 43,000 ––––––––––––– 6,620–––––––––––––73 10,000 0.25 2,500 2 5,000 0.5 5,000 2 10,000 0.1 500100 10,000 3 30,000 2 60,000 0.75 7,500 2 15,000 0.15 1,125––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 20,000 ––––––––––––– 32,500 ––––––––––––– 65,000 ––––––––––––– 12,500 ––––––––––––– 25,000 ––––––––––––– 1,625–––––––––––––105 10,000 3.15 31,500 2 63,000 0.8 8,000 2 16,000 0.1 800106 10,000 2 20,000 2 40,000 0.9 9,000 2 18,000 0.15 1,350107 10,000 1 10,000 2 20,000 1 10,000 2 20,000 0.04 400––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 30,000 ––––––––––––– 61,500 ––––––––––––– 123,000 ––––––––––––– 27,000 ––––––––––––– 54,000 ––––––––––––– 2,550–––––––––––––126 10,000 2.15 21,500 2 43,000 0.6 6,000 2 12,000 0.05 300127 10,000 4.15 41,500 2 83,000 0.75 7,500 2 15,000 0.05 375128 10,000 1.5 15,000 2 30,000 1.2 12,000 2 24,000 0.11 1,320129 10,000 4.55 45,500 2 91,000 1.1 11,000 2 22,000 0.04 440130 10,000 4.5 45,000 2 90,000 1.2 12,000 2 24,000 0.04 480131 10,000 4.85 48,500 2 97,000 1 10,000 2 20,000 0.1 1,000132 10,000 4.25 42,500 2 85,000 0.8 8,000 2 16,000 0.15 1,200133 10,000 3.9 39,000 2 78,000 1.05 10,500 2 21,000 0.625 6,563134 10,000 1 10,000 2 20,000 1 10,000 2 20,000 0.18 1,800135 10,000 0.4 4,000 2 8,000 0.75 7,500 2 15,000 0.04 300––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 100,000 ––––––––––––– 312,500 ––––––––––––– 625,000 ––––––––––––– 94,500 ––––––––––––– 189,000 ––––––––––––– 13,778–––––––––––––203

Block Gravel Est.Gravel GravelSurface O/Burden Est.O/B O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area Thickness Volume S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats144 10,000 3.85 38,500 2 77,000 0.9 9,000 2 18,000 0.04 360145 10,000 4.25 42,500 2 85,000 1.1 11,000 2 22,000 0.05 550146 10,000 0 0 2 0 0.75 7,500 2 15,000 0.04 300147 10,000 2.9 29,000 2 58,000 0.8 8,000 2 16,000 0.04 320148 10,000 0 0 2 0 0.6 6,000 2 12,000 0.04 240149 10,000 0.75 7,500 2 15,000 1 10,000 2 20,000 0.04 400150 10,000 1.45 14,500 2 29,000 0.9 9,000 2 18,000 0.04 360151 10,000 4.7 47,000 2 94,000 1.3 13,000 2 26,000 0.1 1,300152 10,000 2.75 27,500 2 55,000 1.1 11,000 2 22,000 0.625 6,875153 10,000 2.35 23,500 2 47,000 1.7 17,000 2 34,000 0.625 10,625154 10,000 5 50,000 2 100,000 1 10,000 2 20,000 0.915 9,150155 10,000 4.05 40,500 2 81,000 1.1 11,000 2 22,000 0.4 4,400156 10,000 4.25 42,500 2 85,000 1.1 11,000 2 22,000 0.04 440157 10,000 5.15 51,500 2 103,000 0.9 9,000 2 18,000 0.04 360158 10,000 4.72 47,200 2 94,400 1.17 11,700 2 23,400 0.16 1,872159 10,000 5.15 51,500 2 103,000 0.9 9,000 2 18,000 0.6 5,400160 10,000 4.75 47,500 2 95,000 0.5 5,000 2 10,000 0.2 1,000––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 170,000 ––––––––––––– 560,700 ––––––––––––– 1,121,400 ––––––––––––– 168,200 ––––––––––––– 336,400 ––––––––––––– 43,952–––––––––––––166 10,000 3.85 38,500 2 77,000 1 10,000 2 20,000 0.6 6,000167 10,000 2.7 27,000 2 54,000 1.45 14,500 2 29,000 0.1 1,450168 10,000 3.75 37,500 2 75,000 0.8 8,000 2 16,000 0.1 800169 10,000 3.4 34,000 2 68,000 0.8 8,000 2 16,000 0.04 320170 10,000 3.4 34,000 2 68,000 1.15 11,500 2 23,000 0.1 1,150171 10,000 4.7 47,000 2 94,000 0.95 9,500 2 19,000 0.6 5,700172 10,000 2.95 29,500 2 59,000 1 10,000 2 20,000 0.1 1,000173 10,000 2.5 25,000 2 50,000 1 10,000 2 20,000 0.1 1,000174 10,000 1.05 10,500 2 21,000 0.9 9,000 2 18,000 0.05 450175 10,000 2.85 28,500 2 57,000 1 10,000 2 20,000 0.05 500176 10,000 3.65 36,500 2 73,000 1.1 11,000 2 22,000 0.3 3,300177 10,000 3.05 30,500 2 61,000 0.75 7,500 2 15,000 0.6 4,500178 10,000 3.2 32,000 2 64,000 0.8 8,000 2 16,000 0.6 4,800204

Block Gravel Est.Gravel GravelSurface O/Burden Est.O/B O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area Thickness Volume S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats179 10,000 4.95 49,500 2 99,000 1.1 11,000 2 22,000 0.6 6,600180 10,000 3.6 36,000 2 72,000 1.1 11,000 2 22,000 0.7 7,700181 10,000 4.35 43,500 2 87,000 1.5 15,000 2 30,000 0.6 9,000182 10,000 5.15 51,500 2 103,000 0.9 9,000 2 18,000 0.6 5,400183 10,000 3.05 30,500 2 61,000 0.9 9,000 2 18,000 0.1 900184 10,000 5.75 57,500 2 115,000 1.4 14,000 2 28,000 0.15 2,100185 10,000 5.25 52,500 2 105,000 1.4 14,000 2 28,000 0.15 2,100186 10,000 3.75 37,500 2 75,000 0.8 8,000 2 16,000 0.05 400––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 210,000 769,000 1,538,000 218,000 436,000 65,170––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––191 5,000 4.55 22,750 2 45,500 1.3 6,500 2 13,000 0.16 1,040192 10,000 3.75 37,500 2 75,000 1.5 15,000 2 30,000 0.4 6,000193 10,000 3.95 39,500 2 79,000 1 10,000 2 20,000 0.5 5,000194 10,000 5.55 55,500 2 111,000 0.85 8,500 2 17,000 0.5 4,250195 10,000 4.55 45,500 2 91,000 1.7 17,000 2 34,000 0.2 3,400196 10,000 5.05 50,500 2 101,000 1.4 14,000 2 28,000 0.1 1,400197 10,000 4.55 45,500 2 91,000 0.9 9,000 2 18,000 0.45 4,050198 10,000 3.75 37,500 2 75,000 1 10,000 2 20,000 0.45 4,500199 10,000 4.45 44,500 2 89,000 1.1 11,000 2 22,000 0.45 4,950200 10,000 2.35 23,500 2 47,000 1 10,000 2 20,000 0.3 3,000201 10,000 4.45 44,500 2 89,000 1.2 12,000 2 24,000 0.4 4,800202 10,000 5.05 50,500 2 101,000 1 10,000 2 20,000 0.75 7,500203 10,000 4.75 47,500 2 95,000 1.3 13,000 2 26,000 1.2 15,600204 10,000 3.45 34,500 2 69,000 1 10,000 2 20,000 0.625 6,250205 10,000 2.75 27,500 2 55,000 0.65 6,500 2 13,000 0.1 650––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 145,000 ––––––––––––– 606,750 ––––––––––––– 1,213,500 ––––––––––––– 162,500 ––––––––––––– 325,000 ––––––––––––– 72,390–––––––––––––207 10,000 3.2 32,000 2 64,000 1.45 14,500 2 29,000 0.3 4,350208 10,000 2.75 27,500 2 55,000 0.7 7,000 2 14,000 0.1 700209 10,000 0 0 2 0 0.75 7,500 2 15,000 0.625 4,688210 10,000 0.75 7,500 2 15,000 1.35 13,500 2 27,000 0.16 2,160211 10,000 3.05 30,500 2 61,000 1.4 14,000 2 28,000 0.04 560205

Block Gravel Est.Gravel GravelSurface O/Burden Est.O/B O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area Thickness Volume S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats212 10,000 5.45 54,500 2 109,000 1.3 13,000 2 26,000 0.04 520213 10,000 6.45 64,500 2 129,000 1 10,000 2 20,000 0.04 400––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 70,000 ––––––––––––– 216,500 ––––––––––––– 433,000 ––––––––––––– 79,500 ––––––––––––– 159,000 ––––––––––––– 13,378–––––––––––––218 10,000 4.45 44,500 2 89,000 0.8 8,000 2 16,000 0.04 320219 10,000 4.35 43,500 2 87,000 0.95 9,500 2 19,000 0.04 380220 10,000 5.25 52,500 2 105,000 0.7 7,000 2 14,000 0.05 350221 10,000 4.5 45,000 2 90,000 0.5 5,000 2 10,000 0.25 1,250222 10,000 4.5 45,000 2 90,000 0.5 5,000 2 10,000 0.25 1,250223 10,000 4.5 45,000 2 90,000 0.5 5,000 2 10,000 0.16 800224 10,000 3.85 38,500 2 77,000 1.2 12,000 2 24,000 0.16 1,920225 10,000 4.75 47,500 2 95,000 0.8 8,000 2 16,000 0.05 400226 10,000 4.65 46,500 2 93,000 0.9 9,000 2 18,000 0.05 450227 10,000 4.75 47,500 2 95,000 0.6 6,000 2 12,000 0.2 1,200228 10,000 4.85 48,500 2 97,000 1.4 14,000 2 28,000 0.5 7,000229 10,000 5.25 52,500 2 105,000 0.8 8,000 2 16,000 0.5 4,000230 10,000 5 50,000 2 100,000 0.75 7,500 2 15,000 0.5 3,750231 10,000 0 0 2 0 0.5 5,000 2 10,000 0.35 1,750232 10,000 0 0 2 0 0.5 5,000 2 10,000 0.04 200233 10,000 0 0 2 0 0.45 4,500 2 9,000 0.04 180234 10,000 0 0 2 0 0.25 2,500 2 5,000 0.1 250235 10,000 0 0 2 0 0.45 4,500 2 9,000 0.15 675236 10,000 0 0 2 0 0.65 6,500 2 13,000 0.1 650––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 190,000 ––––––––––––– 606,500 ––––––––––––– 1,213,000 ––––––––––––– 132,000 ––––––––––––– 264,000 ––––––––––––– 26,775–––––––––––––251 10,000 ––––––––––––– 3.5 35,000 ––––––––––––– 2 70,000 ––––––––––––– 0.75 7,500 ––––––––––––– 2 15,000 ––––––––––––– 0.04 300–––––––––––––Totals 10,000 ––––––––––––– 35,000 ––––––––––––– 70,000 ––––––––––––– 7,500 ––––––––––––– 15,000 ––––––––––––– 300–––––––––––––258 10,000 0 0 2 0 0.65 6,500 2 13,000 0.04 260259 10,000 0 0 2 0 0.65 6,500 2 13,000 0.06 390260 10,000 0 0 2 0 0.5 5,000 2 10,000 0.6 3,000206

Block Gravel Est.Gravel GravelSurface O/Burden Est.O/B O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area Thickness Volume S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats261 10,000 0 0 2 0 0.5 5,000 2 10,000 0.9 4,500262 10,000 0.1 1,000 2 2,000 1 10,000 2 20,000 0.1 1,000––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 50,000 ––––––––––––– 1,000 ––––––––––––– 2,000 ––––––––––––– 33,000 ––––––––––––– 66,000 ––––––––––––– 9,150–––––––––––––279 10,000 0.1 1,000 2 2,000 0.5 5,000 2 10,000 0.1 500280 10,000 0.1 1,000 2 2,000 0.5 5,000 2 10,000 0.36 1,800281 10,000 0.1 1,000 2 2,000 0.5 5,000 2 10,000 0.25 1,250––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 30,000 3,000 6,000 15,000 30,000 3,550––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––298 10,000 0.25 2,500 2 5,000 0.4 4,000 2 8,000 0.08 320299 10,000 0.25 2,500 2 5,000 0.4 4,000 2 8,000 0.1 400––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––Totals 20,000 ––––––––––––– 5,000 ––––––––––––– 10,000 ––––––––––––– 8,000 ––––––––––––– 16,000 ––––––––––––– 720–––––––––––––Grand Totals 1,075,000 3,247,950 6,495,900 979,200 1,958,400 259,957––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––207

MINING BLOCKS WITH ESTIMATED TONNES OVERBURDEN, GRAVEL & DIAMOND PRODUCTIONBLOCK MAP 3: MANDALA SOUTHERN BLOCKSBlock O/Burden Est.O/B Gravel Est.Gravel GravelSurface Thickness Volume O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area m. cu.m. S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats8 10,000 3.7 37,000 2 74,000 1.1 11,000 2 22,000 0.36 3,9609 10,000 3.65 36,500 2 73,000 1.4 14,000 2 28,000 0.5 7,00010 10,000 3.65 36,500 2 73,000 1.1 11,000 2 22,000 0.5 5,500---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 30,000 ---------------------- 110,000 ---------------------- 220,000 ---------------------- 36,000 ---------------------- 72,000 ---------------------- 16,460----------------------14 10,000 1.45 14,500 2 29,000 0.5 5,000 2 10,000 0.16 80015 10,000 3.2 32,000 2 64,000 0.8 8,000 2 16,000 0.1 80016 10,000 4.65 46,500 2 93,000 1.5 15,000 2 30,000 0.4 6,00017 10,000 2.75 27,500 2 55,000 1.1 11,000 2 22,000 0.5 5,50018 10,000 2.5 25,000 2 50,000 1 10,000 2 20,000 0.4 4,00019 2,500 2.5 6,250 2 12,500 1 2,500 2 5,000 0.2 500---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 52,500 ---------------------- 151,750 ---------------------- 303,500 ---------------------- 51,500 ---------------------- 103,000 ---------------------- 17,600----------------------25 8,000 0.55 4,400 2 8,800 0.7 5,600 2 11,200 0.04 22426 10,000 2.22 22,167 2 44,333 0.6 6,000 2 12,000 0.07 42027 10,000 3.55 35,500 2 71,000 0.9 9,000 2 18,000 0.08 72028 10,000 3.9 39,000 2 78,000 1 10,000 2 20,000 0.2 2,00029 10,000 2.95 29,500 2 59,000 1.12 11,200 2 22,400 0.5 5,60030 10,000 1 10,000 2 20,000 0.5 5,000 2 10,000 0.5 2,500---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 58,000 ---------------------- 140,567 ---------------------- 281,133 ---------------------- 46,800 ---------------------- 93,600 ---------------------- 11,464----------------------37 5,000 3 15,000 2 30,000 1 5,000 2 10,000 0.4 2,00038 1,000 2.75 2,750 2 5,500 1.25 1,250 2 2,500 0.08 10039 1,000 4.25 4,250 2 8,500 1 1,000 2 2,000 0.4 40040 500 3.75 1,875 2 3,750 1.5 750 2 1,500 0.5 37541 9,000 3.75 33,750 2 67,500 1.1 9,900 2 19,800 0.8 7,920---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 16,500 ---------------------- 57,625 ---------------------- 115,250 ---------------------- 17,900 ---------------------- 35,800 ---------------------- 10,795----------------------208

Block O/Burden Est.O/B Gravel Est.Gravel GravelSurface Thickness Volume O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area m. cu.m. S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats47 5,000 1.75 8,750 2 17,500 0.75 3,750 2 7,500 0.08 30048 1 1.75 2 2 4 1.5 2 2 3 0.08 049 1 1.75 2 2 4 0.75 1 2 2 0.08 050 1 3.75 4 2 8 1.5 2 2 3 0.4 151 7,500 3.35 25,125 2 50,250 1.2 9,000 2 18,000 1.5 13,50052 8,000 3.35 26,800 2 53,600 1.2 9,600 2 19,200 1.5 14,400---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 20,503 ---------------------- 60,682 ---------------------- 121,365 ---------------------- 22,354 ---------------------- 44,708 ---------------------- 28,201----------------------56 7,500 3.45 25,875 2 51,750 0.5 3,750 2 7,500 0.4 1,50057 1 3.25 3 2 7 1.25 1 2 3 0.08 058 1 3.75 4 2 8 0.75 1 2 2 0.5 059 1 5.25 5 2 11 1 1 2 2 0.75 160 3,500 3.75 13,125 2 26,250 0.75 2,625 2 5,250 2 5,25061 5,000 4 20,000 2 40,000 0.75 3,750 2 7,500 1.25 4,688---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 16,003 ---------------------- 59,012 ---------------------- 118,025 ---------------------- 10,128 ---------------------- 20,256 ---------------------- 11,439----------------------65 10,000 1.05 10,500 2 21,000 0.5 5,000 2 10,000 0.16 80066 10,000 2.75 27,500 2 55,000 0.65 6,500 2 13,000 0.3 1,95067 10,000 4.45 44,500 2 89,000 0.9 9,000 2 18,000 0.45 4,05068 1 3.85 4 2 8 0.75 1 2 2 0.8 169 2,000 2.75 5,500 2 11,000 0.75 1,500 2 3,000 1 1,50070 1,500 3 4,500 2 9,000 0.75 1,125 2 2,250 0.6 675---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 33,501 ---------------------- 92,504 ---------------------- 185,008 ---------------------- 23,126 ---------------------- 46,252 ---------------------- 8,976----------------------75 2,000 3 6,000 2 12,000 0.5 1,000 2 2,000 0.2 20076 10,000 4.6 46,000 2 92,000 0.95 9,500 2 19,000 0.4 3,80077 10,000 5.5 55,000 2 110,000 1.2 12,000 2 24,000 0.5 6,00078 2,000 4.25 8,500 2 17,000 1 2,000 2 4,000 0.2 40079 2,000 2.25 4,500 2 9,000 1 2,000 2 4,000 0.75 1,50080 2,000 4.3 8,600 2 17,200 1 2,000 2 4,000 0.5 1,000---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 28,000 ---------------------- 128,600 ---------------------- 257,200 ---------------------- 28,500 ---------------------- 57,000 ---------------------- 12,900----------------------209

Block O/Burden Est.O/B Gravel Est.Gravel GravelSurface Thickness Volume O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area m. cu.m. S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats86 10,000 4.55 45,500 2 91,000 1.25 12,500 2 25,000 0.3 3,75087 10,000 4.8 48,000 2 96,000 0.65 6,500 2 13,000 0.45 2,92588 2,500 4.25 10,625 2 21,250 1.25 3,125 2 6,250 0.2 62589 1,000 1.95 1,950 2 3,900 1 1,000 2 2,000 0.2 20090 3,000 4 12,000 2 24,000 1 3,000 2 6,000 0.45 1,350---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 26,500 ---------------------- 118,075 ---------------------- 236,150 ---------------------- 26,125 ---------------------- 52,250 ---------------------- 8,850----------------------95 10,000 4.65 46,500 2 93,000 1.35 13,500 2 27,000 0.15 2,02596 10,000 5 50,000 2 100,000 0.9 9,000 2 18,000 0.5 4,50097 10,000 0.5 5,000 2 10,000 1 10,000 2 20,000 0.7 7,00098 2,500 4.25 10,625 2 21,250 1.35 3,375 2 6,750 0.08 27099 1,000 1.75 1,750 2 3,500 1 1,000 2 2,000 0.08 80---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 33,500 ---------------------- 113,875 ---------------------- 227,750 ---------------------- 36,875 ---------------------- 73,750 ---------------------- 13,875----------------------107 10,000 5.55 55,500 2 111,000 1 10,000 2 20,000 0.36 3,600108 2,500 4.25 10,625 2 21,250 1.5 3,750 2 7,500 0.25 938109 5,000 1.95 9,750 2 19,500 0.75 3,750 2 7,500 0.23 863110 5,000 3.75 18,750 2 37,500 1 5,000 2 10,000 0.35 1,750---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 22,500 ---------------------- 94,625 ---------------------- 189,250 ---------------------- 22,500 ---------------------- 45,000 ---------------------- 7,150----------------------117 3,000 4 12,000 2 24,000 1.5 4,500 2 9,000 0.23 1,035118 1 4.25 4 2 9 1 1 2 2 0.23 0119 5,000 1.75 8,750 2 17,500 0.75 3,750 2 7,500 0.4 1,500120 5,000 3.75 18,750 2 37,500 1 5,000 2 10,000 0.6 3,000---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 13,001 ---------------------- 39,504 ---------------------- 79,009 ---------------------- 13,251 ---------------------- 26,502 ---------------------- 5,535----------------------127 10,000 5.2 52,000 2 104,000 1.4 14,000 2 28,000 0.4 5,600128 7,500 4.75 35,625 2 71,250 1.35 10,125 2 20,250 0.4 4,050129 1 2.75 3 2 6 0.75 1 2 2 0.3 0130 5,000 1 5,000 2 10,000 0.75 3,750 2 7,500 0.3 1,125131 5,000 1 5,000 2 10,000 0.6 3,000 2 6,000 0.2 600---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 27,501 ---------------------- 97,628 ---------------------- 195,256 ---------------------- 30,876 ---------------------- 61,752 ---------------------- 11,375----------------------210

Block O/Burden Est.O/B Gravel Est.Gravel GravelSurface Thickness Volume O/B Est.O/B Thickness Volume Gravel Est.Gravel Grade Est. BlockBlock No. Area m. cu.m. S.G. tonnes incl.dilution cu.m. S.G. tonnes cts/cu.m. carats138 10,000 0.25 2,500 2 5,000 0.6 6,000 2 12,000 0.5 3,000139 10,000 6.15 61,500 2 123,000 0.85 8,500 2 17,000 0.45 3,825140 3,000 3.75 11,250 2 22,500 1.5 4,500 2 9,000 0.65 2,925141 1 0.75 1 2 2 0.75 1 2 2 0.4 0142 1 0.75 1 2 2 0.75 1 2 2 0.25 0143 5,000 0.75 3,750 2 7,500 0.65 3,250 2 6,500 0.1 325---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 28,002 ---------------------- 79,002 ---------------------- 158,003 ---------------------- 22,252 ---------------------- 44,503 ---------------------- 10,075----------------------151 10,000 3.75 37,500 2 75,000 0.65 6,500 2 13,000 0.4 2,600152 3,000 3.75 11,250 2 22,500 0.65 1,950 2 3,900 0.4 780153 1 4.25 4 2 9 0.95 1 2 2 0.2 0154 1 3.75 4 2 8 1 1 2 2 0.2 0---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 13,002 ---------------------- 48,758 ---------------------- 97,516 ---------------------- 8,452 ---------------------- 16,904 ---------------------- 3,380----------------------177 1 4.75 5 2 10 1.5 2 2 3 0.5 1178 4,000 4.25 17,000 2 34,000 0.75 3,000 2 6,000 0.1 300---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 4,001 ---------------------- 17,005 ---------------------- 34,010 ---------------------- 3,002 ---------------------- 6,003 ---------------------- 301----------------------188 10 3.25 33 2 65 1.5 15 2 30 0.3 5189 10 4.25 43 2 85 1.75 18 2 35 0.3 5---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------Totals 20 ---------------------- 75 ---------------------- 150 ---------------------- 33 ---------------------- 65 ---------------------- 10----------------------Grand Totals 423,034 1,409,286 2,818,573 399,672 799,343 178,386------------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------211

APPENDIX CLIST OF PHYSICAL ASSETS & ESTIMATED VALUESEst. ValueAsset Class & Description Location Owned by (US$)Mining Equipment at Mandala – ADT’s,Excavators, bulldozer & ancillary vehicles Mandala Project, Guinea RMG 1,363,000Pick-up trucks, motorcycles, water bowser Mandala Project, Guinea RMG 59,500100-tonne/hour DMS processing plant andspares Mandala Project, Guinea RMG 2,292,150Mandala camp: furniture, equipment,fittings, generator set, water pumps Mandala Project, Guinea RMG 74,945Engineering workshop tools & Equipment Mandala Project, Guinea RMG 18,376Total 3,807,971Pick-up trucks, & other vehicles Bomboko Project, Guinea WAD 151,50016’ & 10’ pan plants Bomboko Project, Guinea WAD 900,000Ancillary plant & equipment Bomboko Project, Guinea WAD 139,871Earth moving Equipment Bomboko Project, Guinea WAD 714,371Engineering workshop tools & Equipment Bomboko Project, Guinea WAD 48,563Bomboko camp: furniture, equipment,fittings, generator set, water pumps Bomboko Project, Guinea WAD 43,850Total 1,998,155Mobile 5tph DMS processing plant Droujba Project, Guinea WAD 75,000Portable diamond drill rig Droujba Project, Guinea WAD 15,000Total 90,000Conakry office and apartment furniture,fittings & equipment Conakry, Guinea WAD 13,950Total 13,95075-tonne per hour DMS plant plus ancillaryequipment & spares Kono, Sierra Leone Basama 1,100,000Mining Equipment incl. ADT’s,Excavators,FEL’s, winders, air compressors etc Kono, Sierra Leone Basama 522,500Pick-ups & motorcycles Kono, Sierra Leone Basama 36,400Engineering workshop tools & Equipment Kono, Sierra Leone Basama 16,800Offices, Housing, Fittings & equipment Kono, Sierra Leone Basama 214,200Kono, Sierra LeoneTotal 1,889,900Note that Stellar has a 49% interest inthese Basama assets49% 926,051212

PART VIIINTERIM RESULTS OF THE WAD GROUP FOR THE 6 MONTHSTO 31 OCTOBER 2009In the six months under review, WAD did well. The Bomboko mine came on stream. Diamond salesrealised an average $117 per carat at auction. This was lower than expected due to poor marketconditions in early 2009, but due to a marked recovery in the diamond market in the latter part of 2009higher prices are expected. The Company made the decision to continue with an expansion programmeby installing an additional plant to boost production capacity. The mine is now fully operational andcapable of producing 1500 carats a month.Joint ventures were agreed on both of our Sierra Leone projects. This relieves WAD of financial obligationsand allows us to focus our resources on delivering cash flow from Bomboko. We transferred our interest inthe Pipe 3 kimberlite and surrounding dykes to Thunderball, a Lebanese/Japanese consortium with anaggressive plan for exploration and exploitation. WAD retains a 20 per cent. free carry though to production.The WAD mining licence over the Plant 11 undersize tailings near Koidu has been transferred to a localcompany, Pyramid Resources, in return for a 5 per cent. production royalty. Pyramid will minediamonds from the tailings.The highlight of the recent period has been the decision in principle to merge West African Diamonds(WAD) with Stellar Diamonds, a privately held diamond explorer and miner.The combined venture, which subject to approvals and a successful fundraise, will relist in quarter one2010, will have two producing diamond mines in Guinea, Bomboko and Mandala, as well as three jointventures in Sierra Leone. The new company will also hold 100 per cent. interests in two high gradekimberlite projects, Droujba in Guinea and Tongo in Sierra Leone.The agreement being proposed to shareholders will combine WAD and Stellar on a 25/75 per cent.basis, prior to new funding. Subject to successful funding, the new enlarged company will increasemining capacity and revenue at both existing alluvial mines as well as continuing development of thekimberlite projects.The Board of WAD considered the company too small to attract significant investor interest and deemedit essential to grow by consolidation. Merging with Stellar will result in a company with two producingmines delivering robust cash flow. The planned financing will strengthen the balance sheet and enableour high grade kimberlite projects to be developed. The Company will continue to grow byconsolidation activity in what is a fragmented and undervalued industry.Condensed Consolidated Income StatementSix Months EndedYear Ended31 Oct 09 31 Oct 08 30 April 09unaudited unaudited audited£’000 £’000 £’000Revenue 135 27 27Cost of sales (135) (27) (27)Gross profit 0 0 0Administrative expenses (128) (113) (247)OPERATING LOSS (128) (113) (247)Investment income 0 0 3Finance costs (2) (11) (2)LOSS BEFORE TAXATION (130) (124) (246)Income tax expenses 0 0 0LOSS AFTER TAXATION (130) (124) (246)Loss per share – basic and diluted (0.17p) (0.30p) (0.48p)213

Condensed Consolidated Balance Sheet31 Oct 09 31 Oct 08 30 April 09unaudited unaudited audited£’000 £’000 £’000ASSETS:NON CURRENT ASSETSIntangible assets 9,591 7,158 9,468Property, plant & equipment 1,485 1,314 2,06711,076 8,472 11,535CURRENT ASSETSReceivables and prepayments 126 14 7Cash and cash equivalents 71 1,578 242197 1,592 249TOTAL ASSETS 11,273 10,064 11,784LIABILITIES:CURRENT LIABILITIESTrade and other payables (190) (775) (196)NET CURRENT ASSETS/(LIABILITIES) 7 817 53NET ASSETS 11,083 9,289 11,588EQUITY:Share capital 10,939 9,908 10,313Reserves 144 (619) 1,275TOTAL EQUITY 11,083 9,289 11,588Condensed Consolidated Statement of Changes in EquityShare basedShare Share Payment Retained Translation TotalCapital Premium Reserves Losses Reserve Equity£’000 £’000 £’000 £’000 £’000 £’000As at 1 May 2008 407 7,768 356 (851) — 7,680Shares issued for cash 174 1,566 — — — 1,740Share issue expenses — (7) — — — (7)Loss for the period — — — (124) — (124)As at 31 October 2008 581 9,327 356 (975) — 9,289Shares issued for cash 101 304 — — — 405Exchange differencesarising on translation offoreign operations — — — — 2,016 2,016Loss for the period — — — (122) — (122)As at 30 April 2009 682 9,631 356 (1,097) 2,016 11,588Shares issued for cash 217 433 — — — 650Share issue expenses — (24) — — — (24)Share based payments 54 54Exchange differencesarising on translation offoreign operations — — — — (1,055) (1,055)Loss for the period — — — (130) — (130)As at 31 October 2009 899 10,040 410 (1,227) 961 11,083214

Condensed Consolidated Cash FlowSix Months EndedYear Ended31 Oct 09 31 Oct 08 30 April 09unaudited unaudited audited£’000 £’000 £’000CASH FLOW FROM OPERATING ACTIVITIESLoss for the period (130) (124) (246)Exchange movements 9 (16) (4)Share based payments 18 0 0Finance cost 2 11 2Investment revenue 0 0 (3)OPERATING CASH OUTFLOW BEFOREMOVEMENT IN WORKING CAPITAL (101) (129) (251)(Decrease)/increase in trade and other payables (6) 451 (128)Decrease in trade and other receivables (119) 9 15CASH (USED IN)/GENERATED BY OPERATIONS (226) 331 (364)Finance costs (2) (11) (2)Investment revenue 0 0 3NET CASH (USED IN)/GENERATED BYOPERATING ACTIVITIES (228) 320 (363)Payment for intangible assets (548) (549) (1,335)Payment for tangible assets (12) (21) (281)NET CASH USED IN INVESTING ACTIVITIES (560) (570) (1,616)CASH FLOWS FROM INVESTING ACTIVITIESProceeds from issue of equity shares 650 1,740 2,145Share issue costs (24) (7) (7)NET CASH GENERATED FROM FINANCINGACTIVITIES 626 1,733 2,138NET INCREASE/(DECREASE) IN CASH (162) 1,483 159Cash and Cash Equivalents at beginning of the period 242 79 79Effect of foreign rate changes on cash held in foreigncurrencies (9) 16 4CASH AND CASH EQUIVALENTS AT END OFTHE PERIOD 71 1,578 242215

Notes:1. InformationThe financial information for the six months ended October 31, 2009 and the comparative amounts forthe six months ended October 31, 2008 are unaudited. The financial information above does notconstitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reportingas adopted by the European Union. The accounting policies and methods of computation used in thepreparation of the Interim Financial Report are consistent with those used in the Group 2009Annual Report, which is available at www.westafdiamonds.comThe interim financial statements have not been audited or reviewed by the auditors of the Grouppursuant to the Auditing Practices board guidance on Review of Interim Financial Information.2. No dividend is proposed in respect of the period.3. Loss per ShareBasic earnings or loss per share is computed by dividing the profit or loss after taxation for the yearavailable to ordinary shareholders by sum of the weighted average number of ordinary shares in issueand ranking for dividend during the year.Diluted earnings or loss per share is computed by dividing the profit or loss after taxation for the yearby the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutivepotential ordinary shares that were outstanding during the year.The following table sets forth the computation forbasic and diluted loss per share (EPS):31 Oct 09 31 Oct 08 30 April 09£ £ £NumeratorNumerator for basic EPS – retained loss (129,552) (124,026) (246,465)Number Number NumberDenominatorDenominator for basic and diluted EPS 78,399,896 41,110,099 52,147,985Basic and diluted EPS (0.17p) (0.30p) (0.48p)Basic and diluted loss per share is the same as the effect of the outstanding share options is anti-dilutiveand is therefore excluded.4. Intangible AssetsExploration and evaluation assets:31 Oct 09 31 Oct 08 30 April 09£’000 £’000 £’000CostOpening balance 9,468 6,609 6,609Additions during the period 584 549 1,335Transfer from assets under construction 263 — —Net foreign exchange differences (724) — 1,524Closing balance 9,591 7,158 9,468Segmental analysisSierra Leone 6,660 5,734 6,874Guinea 2,931 1,424 2,5949,591 7,158 9,468216

Exploration and evaluation assets relate to expenditure incurred in diamond and gold exploration andrelated expenditure in Sierra Leone and Guinea.The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation,and therefore inherent uncertainty in relation to the carrying value of capitalised exploration andevaluation assets.The realisation of these intangible assets is dependent on the successful discovery and development ofeconomic resources, and is subject to a number of significant potential risks including;• Price fluctuations;• Uncertainties over development and operational costs;• Political and legal risks, including arrangements with governments for licences, profit sharing andtaxation; and• Funding requirements.Should these prove unsuccessful the value included in the balance sheet would be written off to theincome statement.Having reviewed the deferred exploration and evaluation expenditure at 31 October 2009, the directorsare satisfied that the value of the intangible asset is not less than carrying value.Included above is an amount of £36,400 (April 2009: £Nil) of capitalised expenses related toequity-settled share-based payment transactions during the year.5. Property, Plant and EquipmentAssets inthe course ofconstruction –Plant & DiamondEquipment interests Total£’000 £’000 £’000Cost:At 1 May 2008 39 1,254 1,293Additions during the period — 21 21At 31 October 2008 39 1,275 1,314Additions during the period — 260 260Net foreign exchange differences — 493 493At 30 April 2009 39 2,028 2,067Additions during the period — 12 12Transfer to development — (263) (263)Net foreign exchange differences — (331) (331)At 31 October 2009 39 1,446 1,485£1,446,000 relates to assets in the course of construction in Sierra Leone and Guinea. The carryingvalue of the above assets is dependent on the successful discovery and development of economicreserves, including the ability to raise finance to develop future projects. Should this prove unsuccessfulthe value included in the balance sheet would be written down to their net recoverable value.In the opinion of the directors, the carrying value is not less than its recoverable amount. Nodepreciation has been charged in respect of these assets as they are not in a condition necessary for themto be capable of operating in the manner intended by management.217

6. Called-up Share CapitalNumberTotal£’000Authorised:Ordinary shares of 1p each 200,000,000 2,000Allotted Called-up and fully paid:Opening balance 1 May 08 40,750,758 407Issued during the period 17,400,000 174At 31 October 08 58,150,758 581Issued during the period 10,130,086 101At 30 April 09 68,280,844 682Issued during the period 21,666,675 217At 31 October 09 89,947,519 899Movements in issued share capitalOn 6 August 200921,666,675 new ordinary shares were issued at 3p per share to fund ongoing operations; these shareswere issued for cash consideration.7. The Interim Report for the six months to 31 October, 2009 was approved by the Directors on7 January 2010.218

PART VIIIACCOUNTANTS’ REPORT ON THE STELLAR GROUPThe Existing Directors and Proposed DirectorsWest African Diamonds Plc20-22 Bedford RoadLondonWC1R 4JSThe DirectorsRoyal Bank of Canada Europe Limited71 Queen Victoria StreetLondonEC4V 4DE27 January 2010Dear SirsIntroductionWe report on the consolidated financial information of Stellar Diamonds Limited (“Stellar”) and itssubsidiaries set out in note 3 to the financial information (together the “Stellar Group”), which has beenprepared for inclusion in the AIM Admission Document (the “Admission Document”) dated 27 January2010 of West African Diamonds Plc (the “Company”), on the basis of the accounting policies set out innote 3 to the financial information. This report is required by paragraph (a) of Schedule Two to the AIMRules for Companies (the “AIM Rules”) and is given for the purposes of complying with the AIM Rulesand for no other purpose.Save for any responsibility arising under the AIM Rules to any person as and to the extent thereprovided, to the fullest extent permitted by law we do not assume any responsibility and will not acceptany liability to any person other than the addressees of this letter for any loss suffered by any suchperson as a result of, arising out of, or in connection with this report or our statement, required by andgiven solely for the purposes of complying with the AIM Rules, consenting to its inclusion in theAdmission Document dated 27 January 2010 of the Company.ResponsibilitiesThe Existing Directors and Proposed Directors of the Company are responsible for preparing the financialinformation on the basis of preparation set out in note 2 to the financial information and in accordancewith International Financial Reporting Standards as endorsed by the European Union (“IFRS”).It is our responsibility to form an opinion on the consolidated financial information as to whether theconsolidated financial information gives a true and fair view, for the purposes of the AdmissionDocument, and to report our opinion to you.Basis of OpinionWe conducted our work in accordance with Standards of Investment Reporting issued by the AuditingPractices Board in the United Kingdom. Our work included an assessment of evidence relevant to theamounts and disclosures in the financial information. It also included an assessment of significantestimates and judgments made by those responsible for the preparation of the financial statementsunderlying the financial information and whether the accounting policies are appropriate to the entity’scircumstances, consistently applied and adequately disclosed.219

We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance thatthe financial information is free from material misstatement, whether caused by fraud or otherirregularity or error.OpinionIn our opinion, the financial information gives, for the purposes of the Admission Document, a true andfair view of the state of affairs of the Stellar Group as at the dates stated and of the statements ofcomprehensive income, statements of financial position, statements of changes in equity and statementsof cash flows for the periods then ended in accordance with the basis of preparation set out in note 2 tothe consolidated financial information and in accordance with IFRS and has been prepared in a formthat is consistent with the accounting policies adopted by the Company.DeclarationFor the purposes of paragraph (a) of Schedule Two of the AIM Rules, we are responsible for this reportas part of the Admission Document and declare that we have taken all reasonable care to ensure that theinformation contained in this report is, to the best of our knowledge, in accordance with the facts andcontains no omission likely to affect its import. This declaration is included in the Admission Documentin compliance with Schedule Two of the AIM Rules.Yours faithfullyMazars LLP220

Statements of Comprehensive IncomeThe consolidated statements of comprehensive income of the Stellar Group for the eight-month periodended 31 December 2007, the year ended 31 December 2008 and the nine-month period ended30 September 2009 are set out below:8 months ended Year ended 9 months ended31 December 31 December 30 September2007 2008 2009Notes $’000 $’000 $’000Revenue — — 564Cost of sales — — (1,404)Gross loss — — (840)Administrative expenses– Impairment of intangible assets 10 — (7,977) (6,946)– Other administrative expenses 6 (2,972) (2,774) (1,757)Total operating expenditure (2,972) (10,751) (8,703)Financial income 19 31 —Financial expense — — (98)Loss before tax (2,953) (10,720) (9,641)Income tax expense 8 — — —Loss for the period and total comprehensiveloss for the period attributable to equityholders of the parent (2,953) (10,720) (9,641)Basic and diluted loss per share 9 $ (0.18) $ (0.35) $ (0.19)All operations are continuing operations.221

Statements of Financial PositionThe consolidated statements of financial position of the Stellar Group as at 31 December 2007,31 December 2008 and 30 September 2009:31 December 31 December 30 September2007 2008 2009Notes $’000 $’000 $’000AssetsNon-current assetsIntangible assets 10 18,167 15,753 2,781Property, plant and equipment 11 2,072 3,954 10,97420,239 19,707 13,755Current assetsInventories 12 — — 501Receivables 13 938 1,193 488Cash at cash equivalents 14 1,716 2,377 419Total current assets 2,654 3,570 1,408Total assets 22,893 23,277 15,163Shareholders’ equity and liabilitiesShareholders’ equityShare capital 15 557 974 998Share premium 15 21,054 31,134 31,398Warrant reserve 15 902 1,172 270Share option reserve 16 1,864 2,334 2,709Convertible loan reserve 22 — — 88Accumulated loss (2,953) (13,673) (22,412)Total shareholders’ equity 21,424 21,941 13,051Non-current liabilitiesConvertible loan notes 22 — — 390Provision 17 — — 54Total non-current liabilities — — 444Current liabilitiesTrade and other payables 18 978 512 377Other liabilities 19 491 824 716Convertible loan notes 22 — — 537Derivative financial instruments 22 — — 38Total current liabilities 1,469 1,336 1,668Total liabilities 1,469 1,336 2,112Total shareholders’ equity and liabilities 22,893 23,277 15,163222

Statements of changes in EquityThe consolidated statements of changes in equity of the Stellar Group for the eight-month period ended31 December 2007, the year ended 31 December 2008 and the nine-month period ended 30 September2009 are set out below:Share ConvertibleShare Share Warrant option loan Accumulated Totalcapital premium reserve reserve reserve loss equity$’000 $’000 $’000 $’000 $’000 $’000 $’000Balance at 2 May 2007 — — — — — — —Total comprehensive lossfor the period — — — — — (2,953) (2,953)Issue of share capital 557 22,608 — — — — 23,165Issuance of warrants — — 902 — — — 902Share issue expenses — (1,554) — — — — (1,554)Share based compensation — — — 1,864 — — 1,864Balance at 31 December 2007 557 21,054 902 1,864 — (2,953) 21,424Total comprehensive lossfor the year — — — — — (10,720) (10,720)Issue of share capital 417 10,115 — — — — 10,532Issuance of warrants — — 270 — — — 270Share issue expenses — (35) — — — — (35)Share based compensation — — — 470 — — 470Balance at 31 December 2008 974 31,134 1,172 2,334 — (13,673) 21,941Total comprehensive lossfor the period — — — — — (9,641) (9,641)Issue of share capital 24 264 — — — — 288Expired warrants — — (902) — — 902 —Equity component ofconvertible loans — — — — 88 — 88Share based compensation — — — 375 — — 375Balance at 30 September 2009 998 31,398 270 2,709 88 (22,412) 13,051The share capital comprises the par value of the Ordinary issued share capital in Stellar.The share premium recognises the excess over nominal value recognised from the issue of Ordinaryshares in Stellar.The warrant reserve comprises the fair value of warrants issued, measured at grant date fair value.The share option reserve comprises the fair value of share options issued, measured at grant date fairvalue and spread over the vesting period.The convertible loan reserve comprises the fair value of the equity component of issued convertible loans.The accumulated loss comprises Stellar’s cumulative accounting losses incurred since incorporation.223

Statements of Cash FlowsThe consolidated statements of cash flows of the Stellar Group for the eight-month period ended31 December 2007, the year ended 31 December 2008 and the nine-month period ended 30 September2009 are set out below:8 months ended Year ended 9 months ended31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Cash flows from operating activities:Net loss for the period (2,953) (10,720) (9,641)Items not involving cash:– Loss on disposal of property, plant and equipment — — 28– Depreciation of property, plant and equipment 283 39 730– Impairment of intangible assets — 7,977 6,946– Share-based payment expense 1,864 470 375– Shares issued for nil consideration — — 288– Interest income (19) (31) —– Interest expense — — 98– Net foreign exchange loss 35 185 21Change in working capital items:– (Increase) in inventories — — (501)– (Increase)/decrease in receivables (938) (255) 705– Increase/(decrease) in trade and other payables 273 239 (183)– Increase/(decrease) in other liabilities 491 907 (108)Net cash used in operations (964) (1,189) (1,242)Cash flows from investing activitiesPurchase of property, plant and equipment (1,650) (1,921) (221)Payments to acquire intangible assets (5,056) (5,563) (1,477)Interest received 19 31 —Net cash used in investing activities (6,687) (7,453) (1,698)Cash flows from financing activitiesProceeds from the issue of convertible loans — — 1,053Proceeds from the issue of share capital, net of costs 9,402 9,488 —Interest paid — — (50)Net cash generated by financing activities 9,402 9,488 1,003Net cash flow 1,751 846 (1,937)Cash and cash equivalents, beginning of period — 1,716 2,377Effect of foreign exchange rate changes (35) (185) (21)Cash and cash equivalents, end of period 1,716 2,377 419224

NOTES TO THE FINANCIAL INFORMATION1. General informationStellar was incorporated on 2 May 2007 in Guernsey, Channel Islands. The principal activity of theStellar Group during the period was that of mineral exploration. The principal activity of Stellar wasthat of a holding company.2. Basis of preparationThe consolidated financial information has been prepared in accordance with The Companies(Guernsey) Law 2008 and International Financial Reporting Standards as adopted by the EuropeanUnion (“IFRS”).The consolidated financial information has been prepared on an historical cost basis, as adjusted forfinancial instruments carried at fair value.The consolidated financial information is presented in United States Dollars and all values rounded tothe nearest thousand Dollars except when otherwise indicated.Standards in issue but not yet effectiveThe following standards and interpretations which have been recently issued or revised have not beenadopted early:IFRS 1 (Revised) First Time Adoption of International Financial Reporting Standards (effective1 January 2010);IFRS 2 (Amended) Share Based Payment (effective 1 January 2010);IFRS 5 (Amended) Non-Current Assets Held for Sale and Discontinued Operations (effective1 January 2010);IFRS 8 (Amended) Operating Segments (effective 1 January 2010);IFRS 9 Financial Instruments (effective 1 January 2013);IAS 1 (Amended) Presentation of Financial Statements (effective 1 January 2010);IAS 7 (Amended) Statement of Cash Flows (effective 1 January 2010);IAS 17 (Amended) Leases (effective 1 January 2010);IAS 24 (Revised) Related Party Disclosures (effective 1 January 2011);IAS 32 (Amended) Financial Instruments: Presentation (effective 1 February 2010);IAS 36 (Amended) Impairment of Assets (effective 1 January 2010);IAS 39 (Amended) Financial Instruments: Recognition and Measurement (effective 1 January 2010); andIFRIC 19 Extinguishing financial liabilities with equity instruments (effective 1 July 2010).The Directors anticipate that the adoption of these interpretations in future periods will have no materialfinancial impact on the consolidated financial information of the Stellar Group.3. Significant accounting policiesThe following principal accounting policies have been used consistently in the preparation of theconsolidated financial information of the Stellar Group.The accounting policies set out below have been applied consistently in the preparation of theconsolidated financial information, unless otherwise stated.225

NOTES TO THE FINANCIAL INFORMATIONBasis of consolidationSubsidiariesSubsidiaries are entities controlled by Stellar. Control exists when Stellar has the power, directly orindirectly, to govern the financial and operating policies of an entity so as to obtain benefits from itsactivities. In assessing control, potential voting rights that presently are exercisable or convertible aretaken into account. The financial information of subsidiaries are included in the consolidated financialinformation from the date that control commences until the date that control ceases.The financial information includes the following subsidiaries and joint ventures:EffectivepercentageCompany Place of incorporation ownership2009Guinean Diamond Corporation Ltd Mahe, Seychelles 100%(and its subsidiaries):– Mano River Diamants Guinee SA Conakry, Guinea 100%– Ressources Mandala Guinee SARL Conakry, Guinea 100%East Sierra Diamonds Limited ^ Mahe, Seychelles 100%(and its branch):– East Sierra Diamonds Limited ^ Freetown, Sierra Leone 100%Basama Diamonds Limited Mahe, Seychelles 49%(and its branch):– Basama Diamonds Limited Freetown, Sierra Leone 49%Sierra Diamonds Limited Tortola, BVI 100%(and its branch):– Sierra Diamonds Limited Freetown, Sierra Leone 100%Mandiamo Limited Mahe, Seychelles 100%Diamantes du Congo Oriental Limited ^ Tortola, BVI 100%Mano Diamonds (Sierra Leone) Limited ^ Freetown, Sierra Leone 100%Stellar Diamonds Congo SPRL ^ Democratic Republic of Congo 99.9%Mano Diamonds (Liberia) Inc ^ Monrovia, Liberia 100%2008 and 2007 (additional)Western Mineral Resources Corporation Inc * Tortola, BVI 100%(and its subsidiaries):– Western Mineral Resources Corp (Liberia) * Monrovia, Liberia 100%– Alpha Minerals Inc * Monrovia, Liberia 100%Weasua Diamonds Ltd * Mahe, Seychelles 50%(and its subsidiary):– KPO Resources Inc * Monrovia, Liberia 50%* Transferred to African Aura Mining Inc (“African Aura”) during the nine-month period ended 30 September 2009, as set out innote 23.^ To be wound up after 30 September 2009, as set out in note 24.Transactions eliminated on consolidationIntra-group balances and any unrealised gains and losses or income and expenses arising from intragrouptransactions, are eliminated in preparing the consolidated financial information.Joint venturesStellar has entered into certain agreements with third parties to develop exploration projects. Thesearrangements involve the establishment of another entity in which each venturer has an interest and acontractual arrangement exists between the venturers to establish joint control over the economicactivity of the joint venture entity.The joint ventures are accounted for using the proportionate consolidation method, which requires theappropriate share of the assets, liabilities and related income and expenses to be included within theconsolidated financial information.226

NOTES TO THE FINANCIAL INFORMATIONForeign currency translationFunctional and presentation currencyItems included in the financial information of each of the Stellar Group’s entities are measured usingthe currency of the primary economic environment in which the entity operates (the “functionalcurrency”). The consolidated financial information is presented in United States Dollars, which is thefunctional and presentation currency for all the Stellar Group’s operations.Foreign currency transactionsForeign currency transactions are translated into the financial currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetary assetsand liabilities denominated in foreign currencies are recognised in the income statement.Property, plant and equipmentAll property, plant and equipment is stated at historical cost less depreciation. Historical cost includesexpenditures that are directly attributable to the acquisition of the items. Subsequent costs are includedin the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probablethat future economic benefits associated with the item will flow to the Stellar Group and the cost of theitem can be measured reliably. The carrying amounts of any replaced parts are derecognised. All otherrepairs and maintenance are charged to the income statement during the financial period in which theyare incurred.Mining assets are depreciated using a units of production method based on the quantity of caratsproduced over the economically recoverable reserves.Machinery and equipment is comprised of office furniture, automobiles and various equipment, aredepreciated at 30 per cent. per annum on a declining balance basis.Assets in the course of construction are carried at cost less any recognised impairment loss.Depreciation of these assets commences when the assets are ready for their intended use.The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balancesheet date. An asset’s carrying amount is written down immediately to its recoverable amount if theasset’s carrying amount is greater than its estimated recoverable amount.Resources properties and deferred explorationStellar follows the method of accounting for its mineral properties whereby all costs related toacquisition and exploration are capitalised by property. These assets are not depreciated. The carryingamounts of the pre-production and exploration properties are reviewed periodically and either writtenoff when it is determined that the expenditures will not result in the discovery of economicallyrecoverable mineral reserves or transferred to mining assets, plant and equipment when commercialdevelopment commences. Stellar also reviews carrying amounts of the pre-production and explorationproperties at each balance sheet date to determine whether there is any indication of impairment. Animpairment test is performed when facts and circumstances suggest that the carrying amount of theassets may exceed their recoverable amount.ImpairmentAt each balance sheet date, Stellar reviews the carrying amounts of its tangible and intangible assets todetermine whether there is any indication that those assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). Where the asset does not generate cash flows that are independent from otherassets, Stellar estimates the recoverable amount of the cash-generating unit to which the asset belongs.An intangible asset with an indefinite useful life is tested for impairment annually and whenever thereis an indication that the asset may be impaired.227

NOTES TO THE FINANCIAL INFORMATIONRecoverable amount is the higher of fair value less costs to sell and value in use. In assessing value inuse, the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to the assetfor which the estimates of future cash flows have not been adjusted.If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carryingamount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.An impairment loss is recognised as an expense immediately.Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generatingunit) is increased to the revised estimate of its recoverable amount, but so that the increased carryingamount does not exceed the carrying amount that would have been determined had no impairment lossbeen recognised for the asset (cash-generating unit) in prior periods. A reversal of an impairment lossis recognised as income immediately.InventoriesInventories are stated at the lower of cost and net realisable value. Cost of production includes anappropriate portion of production overheads. Net realisable value represents the estimated selling pricein the ordinary course of business less marketing costs.ProvisionsProvisions are recognised when Stellar has a present obligation as a result of a past event, it is probablethat Stellar will be required to settle the obligation and a reliable estimate can be made of the amountof obligation. Where the effect of discounting is material, provisions are discounted. The discount rateused is a pre-tax rate that reflects current market assessments of the time value of money and, whereappropriate, the risks specific to the liability.Decommissioning, mine closure and environmental rehabilitationThe estimated cost of decommissioning, mine closure and environmental rehabilitation is based oncurrent legal requirements and existing technology. A provision is raised based on the present value ofthe estimated costs. These costs are included in the cost of the related asset. The capitalised assets aredepreciated in accordance with the accounting policy for property, plant and equipment.Financial instrumentsIAS 39 establishes standards for classification, recognition, measurement, presentation and disclosureof financial instruments (including derivatives) and non-financial derivatives in the financialstatements. The standard requires Stellar to classify all financial instruments as either held-to-maturity,available-for-sale, held-for-trading, loans and receivables or other financial liabilities. Financial assetsand liabilities held-for-trading will be measured at fair value with gains and losses recognised in netincome. Financial assets held-to-maturity, loans and receivables and financial liabilities other than thoseheld-for-trading will be measured at amortised cost. Available-for-sale investments are measured at fairvalue with unrealised gains and losses recognised. The standard also permits the designation of anyfinancial instrument as held-for-trading upon initial recognition.Stellar has implemented the following classification of its financial assets and financial liabilities:• Cash and cash equivalents are classified as loans and receivables;• Other receivables are classified as loans and receivables as they are short-term in nature and areinitially recorded at fair value and subsequently measured at amortised cost using the effectiveinterest rate method. At 30 September 2009, the recorded amount approximates fair value;• Trade and other payables and amounts due to joint venture partners are classified as “otherfinancial liabilities” and are initially recorded at fair value and subsequently measured atamortised cost using the effective interest rate method. At 30 September 2009, the recordedamount approximates fair value; and• The accounting treatment of convertible loans has been discussed in detail in note 22.228

NOTES TO THE FINANCIAL INFORMATIONTransaction costs directly attributable to the acquisition or issue of a financial asset or financial liabilityare included in the carrying amount of the financial asset or financial liability, and are amortised toincome using the effective interest rate method.Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits.Income taxThe current income tax charge is calculated on the basis of the tax laws enacted or substantively enactedat the balance sheet date in the countries where Stellar’s subsidiaries and associates operate and generatetaxable income. Management periodically evaluates positions taken in tax returns with respect tosituations in which applicable tax regulations is subject to interpretation and establishes provisionswhere appropriate on the basis of amounts expected to be paid to the tax authorities.Deferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. However, the deferred income tax is not accounted for if it arises from initial recognition ofan asset or liability in a transaction other than a business combination that at the time of the transactionaffects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates(and laws) that have been enacted or substantially enacted by the balance sheet date and are expected toapply when the related deferred income tax asset is realised or the deferred income tax liabilityis settled.Deferred income tax assets are recognised to the extent that it is probable that future taxable profit willbe available against which the temporary differences can be utilised.Deferred income tax is provided on temporary differences arising on investments in subsidiaries andassociates, except where the timing of the reversal of the temporary difference is controlled by Stellarand it is probable that the temporary difference will not reverse in the foreseeable future.No charge to taxation arises in the periods ended 31 December 2007, 31 December 2008 and30 September 2009.Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new sharesor options are shown in equity as a deduction, net of tax, from the proceeds.Share-based paymentsEquity-settled share-based payments to employees and others providing similar services are measuredat the fair value of the equity instruments at the grant date. Fair value is measured by use of aBlack-Scholes model. The expected life used in the model has been adjusted, based on managementsbest estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.Equity-settled share options granted to employees vest immediately and therefore the charge isrecognised in the income statement at the grant date.Equity-settled share-based payment transactions with other parties are measured at the fair value of thegoods and services received, except where the fair value cannot be estimated reliably, in which case theyare measured at the fair value of the equity instruments granted, measured at the date the entity obtainsthe goods or the counterparty renders the service.Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the ChiefExecutive Officer. The Chief Executive Officer, who is responsible for allocating resources andassessing performance of the operating segments, has been identified as the steering committee thatmakes strategic decisions.229

NOTES TO THE FINANCIAL INFORMATIONRevenue recognitionRevenue relating to sale of diamonds is measured at the fair value of the consideration received orreceivable. Revenue is recognised when the following conditions are satisfied:• Stellar has transferred to the buyer the significant risks and rewards of ownership of the goods;• Stellar retains neither the continuing managerial involvement to the degree usually associatedwith ownership nor effective control over the goods sold;• the amount of revenue can be measured reliably;• it is probable that the economic benefits associated with the transaction will flow to Stellar; and• the costs incurred or to be incurred in respect of the transaction can be measured reliably.4. Critical accounting estimates and judgementsThe preparation of the consolidated financial information in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect the application of policies andreported amounts of assets and liabilities, income and expenses.Carrying values, estimates and underlying assumptions are reviewed on an ongoing basis. The estimatesand associated assumptions are based on historical experience and various other factors that are believedto be reasonable under the circumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparent from other sources.Key sources of estimation uncertainty and judgements made in applying specific accounting policiesare as follows:Share based paymentsIn determining the fair value of share-based payments made during each of the periods under review toemployees and those parties providing services of a similar nature, a number of assumptions have beenmade by management.Mining assets, resource properties and exploration costsMining assets, resource properties and exploration costs are capitalised are assessed for impairmentwhen circumstances suggest that the carrying amount may exceed the recoverable value. The decisionto capitalise these costs involves judgement as to the likely future commerciality of the asset.The ability of Stellar to realise its investment in resource properties and exploration costs is contingentupon discovery of economically recoverable mineral reserves, the on-going title to the resourceproperties, the ability of Stellar to finance the development of the properties and on the future profitableproduction or proceeds from the property.The success of Stellar’s mineral exploration properties is also influenced by significant risks, legal andpolitical risks and future commodity prices.The Directors assess the recoverability of capitalised resource property and exploration costs at eachreporting date to determine if there is any indication of impairment. If an indication exists, anassessment is made of the recoverable amount. The recoverable amount is the higher of value in use(being the net present value of expected future cash flows) and fair value less costs to sell. Value in useis estimated on operational forecasts for advanced stage projects with key inputs as follows:• Diamond resources;• Diamond prices;• Production levels;• Production costs; and• Capital expenditure.230

NOTES TO THE FINANCIAL INFORMATIONProvisionsSignificant estimates and assumptions are made in determining the amount attributable to rehabilitationprovision. These deal with uncertainties such as legal and regulatory framework, timing and futurecosts. The carrying value of rehabilitation provision is set out in note 17.5. SegmentsStellar is engaged in the acquisition, exploration, development and production of diamond properties inthe West African countries of Sierra Leone, Guinea, Liberia and the Democratic Republic of Congo.Information presented to the Chief Executive Officer for the purposes of resource allocation andassessment of segment performance is focussed on the projects in geographical locations. Thereportable segments under IFRS 8 are therefore as follows:• Guinea;• Sierra Leone;• Liberia; and• Others, which include the Democratic Republic of Congo and corporate activities in the UK.Following is an analysis of the Stellar Group’s revenue and results by reportable segment for each of thefinancial periods included in this report:30 September 2009 Guinea Sierra Leone Liberia Others Total$’000 $’000 $’000 $’000 $’000Revenue 564 — — — 564Segment result (1,263) (7,001) — (1,279) (9,543)Finance expense — — — (98) (98)Loss before tax (1,263) (7,001) — (1,377) (9,641)Income tax expense — — — — —Loss after tax (1,263) (7,001) — (1,377) (9,641)Segment assets 11,795 2,596 12 760 15,163Segment liabilities (111) (716) — (1,285) (2,112)Impairment of intangible assets 73 (7,000) — (19) (6,946)Depreciation of property, plantand equipment (729) (1) — — (730)Share based payment expense — — — (375) (375)Capital additions:– intangible assets 604 927 (71) 17 1,477– property, plant and equipment 275 — — — 275During the period ended 30 September 2009, revenues attributable to Guernsey were $nil (2008: $nil,2007: £nil).As at 30 September 2009, non-current assets located in Guernsey were $nil ((2008: $nil, 2007: £nil).231

NOTES TO THE FINANCIAL INFORMATION31 December 2008 Guinea Sierra Leone Liberia Others Total$’000 $’000 $’000 $’000 $’000Revenue — — — — —Segment result (2,054) (325) (6,825) (1,547) (10,751)Finance income — — — 31 31Loss before tax (2,054) (325) (6,825) (1,516) (10,720)Income tax expense — — — — —Loss after tax (2,054) (325) (6,825) (1,516) (10,720)Segment assets 10,846 8,707 38 3,686 23,277Segment liabilities (115) (745) (168) (308) (1,336)Impairment of intangible assets — (105) (7,363) (509) (7,977)Depreciation of property, plantand equipment (25) (2) — (12) (39)Share based payment expense — — — (470) (470)Capital additions:– intangible assets 1,225 3,012 1,048 278 5,563– property, plant and equipment 1,873 8 — 40 1,92131 December 2007 Guinea Sierra Leone Liberia Others Total$’000 $’000 $’000 $’000 $’000Revenue — — — — —Segment result (283) — — (2,689) (2,972)Finance income — — — 19 19Loss before tax (283) — — (2,670) (2,953)Income tax expense — — — — —Loss after tax (283) — — (2,670) (2,953)Segment assets 8,244 5,628 6,478 2,543 22,893Segment liabilities (706) (259) (72) (432) (1,469)Impairment of intangible assets — — — — —Depreciation of property, plantand equipment (283) — — — (283)Share based payment expense — — — (1,864) (1,864)Capital additions:– intangible assets 1,108 5,609 6,326 80 13,123– property, plant and equipment 2,355 — — — 2,355232

NOTES TO THE FINANCIAL INFORMATION6. Other administrative expenses8 months Year 9 monthsended ended ended31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Auditors’ remuneration:– audit services current year (97) (51) (41)– audit services prior year under provision — (63) (5)– other services prior year – abandoned IPO (13) (286) —Other costs – abandoned IPO (113) (146) —Depreciation of property, plant and equipment (283) (39) (205)Legal fees (154) (281) (52)Executive staff costs (114) (364) (378)Other staff costs — (192) (70)Non Executive Director expenses (33) (186) (237)Holding company administration fee– current year (217) (326) (113)– prior year under provision — (65) —Net foreign exchange loss (35) (185) (21)Marketing and export expenses — — (125)Share based payments (1,864) (470) (375)Write down of inventory — — (14)Loss on disposal of property, plant and equipment — — (28)Other charges (49) (120) (93)(2,972) (2,774) (1,757)7. Key management employment costsEmployment costs for key management personnel (including Directors) comprise:8 months Year 9 monthsended ended ended31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Salaries and other short-term employee benefits (114) (379) (378)Share based payments (1,864) (470) (375)(1,978) (849) (753)Key management personnel comprise the Non-Executive Directors, the Executive Directors and otherpersons having authority and responsibility for planning, directing and controlling the activities of Stellar.Included within the above for the period ended 30 September 2009 are shares issued to Stellar’sNon-Executive Directors, Executive Directors and other key management personnel amounting to$233,000 (2008: $nil, 2007: $nil) (note 15).8. Income tax expense8 months Year 9 monthsended ended ended31 December 31 December 30 SeptemberAnalysis of charge for the period 2007 2008 2009$’000 $’000 $’000Current taxation — — —Deferred taxation — — —— — —233

NOTES TO THE FINANCIAL INFORMATIONThe analysis of the Stellar Group’s taxation charge for the eight-month period ended 31 December 2007,the year ended 31 December 2008 and the nine-month period ended 30 September 2009 based onStellar’s statutory tax rate of 0 per cent. (2008: 0 per cent., 2007: 0 per cent.) is as follows:8 months Year 9 monthsended ended ended31 December 31 December 30 SeptemberFactors affecting tax charge for the period 2007 2008 2009$’000 $’000 $’000Loss for the period (2,953) (10,720) (9,641)Income tax calculated at 0% (2008: 0%, 2007:0%) — — —Impact of overseas tax rates (121) (3,205) (2,555)Impairment not deductible for taxation purposes — 2,420 2,074Tax loss not utilised and carried forward 203 783 244Depreciation in excess of capital allowances — 2 237Capital allowances in excess of depreciation (82) — —— — —A deferred taxation asset is not recognised in respect of carried forward losses due to uncertainty overthe utilisation of the losses. The unrecognised deferred taxation asset is $1,230,000 (2008: $986,000,2007: $203,000) based on carried forward tax losses of $3,519,000 (2008: $2,817,000, 2007: $580,000).The tax losses of $580,000, $2,237,000 and $702,000 incurred during the period ended 31 December2007, the year ended 31 December 2008 and the period ended 30 September 2009 respectively expire tenyears after the financial period in which they were incurred.9. Loss per share8 months Year 9 monthsended ended ended31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Loss after tax attributable to equity holders of the parent (2,953) (10,720) (9,641)Weighted average number of ordinary shares for thepurposes of basic and diluted loss per share 16,530,015 30,774,706 49,513,920Basic and diluted loss per share $ (0.18) $ (0.35) $ (0.19)There are options and warrants outstanding at each period end that could potentially dilute basicearnings per share in the future. These are detailed in notes 15 and 16.234

NOTES TO THE FINANCIAL INFORMATION10. Intangible assetsResource Explorationproperties costs Total$’000 $’000 $’000CostB/fwd at 2 May 2007 — — —Additions 5,044 13,123 18,167C/fwd at 31 December 2007 5,044 13,123 18,167Additions — 5,563 5,563C/fwd at 31 December 2008 5,044 18,686 23,730Additions — 1,477 1,477Transfer to mining assets (4,934) (2,569) (7,503)C/fwd at 30 September 2009 110 17,594 17,704AmortisationB/fwd at 2 May 2007 — — —Impairment — — —C/fwd at 31 December 2007 — — —Impairment (110) (7,867) (7,977)C/fwd at 31 December 2008 (110) (7,867) (7,977)Impairment — (6,946) (6,946)C/fwd at 30 September 2009 (110) (14,813) (14,923)Net book valueAs at 31 December 2007 5,044 13,123 18,167As at 31 December 2008 4,934 10,819 15,753As at 30 September 2009 — 2,781 2,781At each period end, the Directors undertake an impairment review on each asset to determine itsrecoverable amount, based on the net present value of future cash flows arising from the asset’seconomic life of between five and ten years, using a discount rate of 12 per cent. Where the value inuse is in excess of the asset’s carrying value, an impairment provision is recorded.As a result of impairment reviews carried out during the nine-month period ended 30 September 2009,an impairment of $6,946,000 (2008: $7,977,000, 2007: $nil) has been recorded.Due to weak diamond prices in the rough diamond market, the Directors made the decision during thenine-month period ended 30 September 2009 to suspend operations and place the Kono project undertemporary care and maintenance until diamond prices recover. In line with the strategy to maintain Konoon care and maintenance, the Directors assessed the recoverable amount of the exploration costs andresource properties relating to the asset and determined that it was impaired by $7,000,000. the recoverableamount was calculated by reference to the asset’s value in use using a discount rate of 12 per cent. appliedto the project’s future cash flows over its ten-year economic life.235

NOTES TO THE FINANCIAL INFORMATION11. Property, plant and equipmentMining Assets under Machinery andassets construction equipment Total$’000 $’000 $’000 $’000CostB/fwd at 2 May 2007 — — — —Additions — 466 1,889 2,355C/fwd at 31 December 2007 — 466 1,889 2,355Additions — 1,791 130 1,921C/fwd at 31 December 2008 — 2,257 2,019 4,276Additions 54 221 — 275Transfer from intangible assets 7,503 — — 7,503Transfer 3,135 (2,438) (697) —Disposal — (40) — (40)C/fwd at 30 September 2009 10,692 — 1,322 12,014DepreciationB/fwd at 2 May 2007 — — — —Charge for the period — — (283) (283)C/fwd at 31 December 2007 — — (283) (283)Charge for the year — — (39) (39)C/fwd at 31 December 2008 — — (322) (322)Charge for the period (525) — (205) (730)Disposal — — 12 12C/fwd at 30 September 2009 (525) — (515) (1,040)Net book valueAs at 31 December 2007 — 466 1,606 2,072As at 31 December 2008 — 2,257 1,697 3,954As at 30 September 2009 10,167 — 807 10,974Assets under construction relate to the Mandala mine in Guinea that was commissioned in April 2009.Included within mining assets is the rehabilitation provision of $54,000 (2008: $nil, 2007: $nil) detailedin note 17.Depreciation of mining assets of $525,000 (2008: $nil, 2007: $nil) has been charged to cost of saleswhilst depreciation of machinery and equipment of $205,000 (2008: $39,000, 2007: $283,000) has beencharged to administrative expenses.Stellar does not have any significant contractually committed capital expenditures as a 30 September 2009.12. Inventories31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Diamonds — — 495Write down — — (14)— — 481Consumables — — 20— — 501236

NOTES TO THE FINANCIAL INFORMATION13. Receivables31 December 31 December 30 SeptemberDue within one year 2007 2008 2009$’000 $’000 $’000Amounts due from parent company 926 905 359Amounts due from associated company — 129 129Other receivables 12 159 —938 1,193 488The amount due from the parent company is under dispute and therefore there is uncertainty over therecoverability of this amount. However, no provision for impairment has been made by Stellar as theDirectors believe the amount is recoverable and are actively pursuing its recovery.14. Cash and cash equivalents31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Cash at bank and on hand 1,697 1,641 419Short-term bank deposits 19 736 —1,716 2,377 41915. Share capital, share premium and warrant reserveNumber of Number of Share Shareshares warrants capital premium Warrants Total$’000 $’000 $’000 $’0008 May 2007 1 — — — — —29 May 2007 1,211,890 605,945 24 1,547 151 1,72211 June 2007 22,049,368 — 434 11,775 — 12,20925 July 2007 4,822,044 2,411,022 99 7,732 631 8,46225 July 2007 — 260,390 — — 120 120At 31 December 2007 28,083,303 3,277,357 557 21,054 902 22,5131 April 2008 2,375,000 — 47 4,643 — 4,69019 December 2008 18,679,451 18,679,451 370 5,437 270 6,077At 31 December 2008 49,137,754 21,956,808 974 31,134 1,172 33,280Expired warrants — (3,277,357) — — (902) (902)Adjustment to 11 June 2007 — — 10 — — 1024 April 2009 400,000 — 6 111 — 1171 June 2009 150,000 — 2 42 — 4431 July 2009 349,500 — 6 111 — 117At 30 September 2009 50,037,254 18,679,451 998 31,398 270 32,666On 8 May 2007, 1 Ordinary share was issued at par on incorporation of Stellar.On 29 May 2007, 1,211,890 Ordinary shares were issued at 66p each for gross proceeds of £800,000($1,571,000) to meet initial working capital requirements.On 11 June 2007, 19,239,540 Ordinary shares were issued at 21.5p each to African Aura, 2,672,629Ordinary shares at 87.1p each to SearchGold Resources Inc and 137,199 Ordinary shares at 87.1p eachto Siafa Koulibaly. The share issues settled the fair value acquisition cost of $12,983,000 of Stellar’sinitial evaluation and exploration assets. Associated costs of the issues charged to share premiumamounted to $774,000.237

NOTES TO THE FINANCIAL INFORMATIONOn 25 July 2007, 4,822,044 Ordinary shares were issued at 87.1p each for gross proceeds of £4,200,000($8,611,000) to meet additional working capital requirements. Associated costs of the issue charged toshare premium amounted to $781,000.On 1 April 2008, 2,375,000 Ordinary shares were issued at £1 each for gross proceeds of £2,375,000($4,725,000). Associated costs of the issue charged to share premium amounted to $35,000.On 19 December 2008, 15,567,670 Ordinary shares were issued at 20p each for gross proceeds of£3,114,000 ($4,802,000). In addition, Stellar settled debt of £622,000 ($1,195,000) through the issue of3,111,781 Ordinary shares at the same price of 20p per share. Each of the Ordinary shares issued on19 December 2008 was issued with a warrant exercisable at 25p at any time over a period of 18 monthsto 30 June 2010. The gross consideration received on the issues of the shares was split between sharecapital, share premium and the warrant reserve. The value attributed to the warrants issued during theyear was 1p. This value is equal to the nominal value of the share capital to which the warrants relateand is considered by the Directors to represent their fair value, given their estimate of the performanceof the underlying diamond market.Warrants issued on 29 May 2007 and 25 July 2007 expired on 28 May 2009 and 24 July 2009.On 24 April 2009, 400,000 Ordinary shares were issued to Lord Daresbury in exchange for servicesprovided to Stellar to the value of £80,000 ($117,000) at a valuation of 20p per Ordinary share. Theshare price used was Stellar’s share price in a private placement on 19 December 2008, which took intoaccount the decline in share prices of similar listed diamond companies in the intervening period.On 1 June 2009, 150,000 Ordinary shares were issued to a third party supplier in exchange forprofessional services provided to Stellar to the value of £30,000 ($44,000) at a valuation of 20p perOrdinary share. The share price used was Stellar’s share price in a private placement on 19 December2008, which took into account the decline in share prices of similar listed diamond companies in theintervening period.On 31 July 2009, 349,500 Ordinary shares were issued at £nil each to Stellar Directors and employeesin exchange for services provided to Stellar to the value of £70,000 ($117,000) at a valuation of 20p perOrdinary share. The share price used was Stellar’s share price in a private placement on 19 December2008, which took into account the decline in share prices of similar listed diamond companies in theintervening period.16. Share optionsThe following is a summary of the share options outstanding and exercisable as at 31 December 2007,31 December 2008 and 30 September 2009 and changes during each of the periods:WeightedNumber of averageOutstanding and exercisable options exercise price£At 2 May 2007 — —Options granted 2,600,000 0.871At 31 December 2007 2,600,000 0.871Options granted 400,000 1.00Options expired (7,500) 0.871At 31 December 2008 2,992,500 0.89Options re-priced 2,465,000 0.225Options not re-priced 527,500 0.871Options granted 1,000,000 0.225At 30 September 2009 3,992,500 0.310238

NOTES TO THE FINANCIAL INFORMATIONDuring the period ended 30 September 2009, the exercise price applicable to 2,465,000 options wasmodified from between £1 and 87.1p to 22.5p as the Directors considered that the options were nolonger beneficial to the holders. The incremental fair value of the re-pricing of the options was$215,000, as calculated by the Black-Scholes option pricing model and using the input assumptions asstated below.At each period end, the following stock options were outstanding and exercisable:31 December 2007 31 December 2008 30 September 2009Number of Number of Number ofstock options stock options stock optionsoutstanding Exercise outstanding Exercise outstanding Exerciseand price and price and priceExpiry date exercisable per share exercisable per share exercisable per share£ £ £26 March 2013 2,600,000 0.871 2,592,500 0.871 527,500 0.87126 March 2013 — — 300,000 1.00 2,365,000 0.22521 April 2013 — — 100,000 1.00 100,000 0.22521 April 2014 — — — — 1,000,000 0.2252,600,000 0.871 2,992,500 0.890 3,992,500 0.310The options issued have resulted in a charge to the statement of comprehensive income of $375,000(2008: $470,000, 2007: $1,864,000) based on using the Black-Scholes option pricing model with thefollowing assumptions:• Dividend yield – $nil (2008: $nil, 2007: $nil);• Weighted average volatility of Stellar’s share price (based on the weighted average volatility fromlisted company peers) – 44 per cent. (2008: 76 per cent., 2007: 40 per cent.);• Weighted average annual risk free rate – 2.4 per cent. (2008: 2.4 per cent., 2007: 2.4 per cent.); and• Expected life – 5 years (2008: 5 years, 2007: 5 years).EligibilityShare options may be granted to Directors, employees or consultants to any company within theStellar Group, who are not bound to retire within six months after the grant date.Grant of optionsThe price per Ordinary share at which options may be exercised shall be determined by the Directorsand will not be less than the market value of an Ordinary share at the date of grant. An option grantedunder the share option scheme may not be transferred, assigned, charged or otherwise alienated otherthan to the participant’s personal representative on death. Any other transfer, assignment, charge,disposal or dealing with the rights and interest of the option will render the option void.Limits on the issue of new sharesStellar’s share option scheme is subject to the limit that not more than 10 per cent. of the issuedOrdinary share capital of Stellar issued or allotted from time to time may in aggregate be placed underoption under the scheme and any other arrangements or agreements providing for the subscription ofshares by or on behalf of employees, Directors or consultants to the Stellar Group.Option termNormally, options may have a maximum term of five years. If an option holder ceases to be an employeein certain circumstances including death, retirement, redundancy, injury or disability, the option may beexercisable within a specified period from the date of the event causing such termination of employmentto the extent that conditions of exercise have been satisfied. Options may be accelerated on a change ofcontrol in Stellar.239

NOTES TO THE FINANCIAL INFORMATIONAdjustmentsIn the event of an adjustment of the share capital of Stellar, the Directors may adjust the number ofOrdinary shares under option and/or the option exercise price. Adjustments to the value of shares underoption are reflected in the financial information in the year of adjustment, taking into considerationadjustments to the Black-Scholes option pricing model assumptions.Amendments to the schemeCertain minor amendments may be made to the rules of the Stellar share option scheme by the Directorsto benefit its administration or to obtain favourable tax or other treatment. However, certain keyprovisions of the scheme (such as eligibility criteria) cannot be altered without the prior approval of theshareholders of Stellar in general meeting.17. Provision31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Balance at beginning of the period — — —Recognised during the period — — 54Balance at end of the period — — 54The provision relates to the rehabilitation of the Mandala mine which is expected to be incurred in 2014.18. Trade and other payables31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Trade payables – plant and equipment 705 — —Other trade payables 143 387 183Audit fees 109 51 26Related parties – Directors 21 74 120Accrued interest on convertible loans — — 48978 512 37719. Other liabilities31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Amounts due to holding company 217 — —Amounts due to joint venture partners 274 824 716491 824 716Included within amounts owed to joint venture partners is $716,000 (2008: $718,000, 2007: $260,000)owed to Petra Diamonds Limited, joint venture partners at the Kono project in Sierra Leone.Further information on the joint venture agreements is given in note 20.240

NOTES TO THE FINANCIAL INFORMATION20. Joint venture partnersThe Stellar Group had the following joint venture agreements in place during the eight-month periodended 31 December 2007, the year ended 31 December 2008 and the nine-month period ended30 September 2009:Trans-Hex Group Limited Joint Venture – KPO projectOn 6 June 2002, a heads of agreement was signed for the creation of a diamond exploration anddevelopment joint venture in Liberia with Trans-Hex Group Limited (“Trans-Hex”) of South Africa.The full joint venture agreement was subsequently signed on 12 October 2006.During the year ended 31 December 2008, the decision was made to cease the exploration joint venturewith Trans-Hex as it was not seen as an economic production site in the then current market.An impairment provision has been made against all capitalised exploration costs incurred to date.African Aura Joint VentureOn 23 March 2005, a joint venture agreement was signed with African Aura targeting diamonds overan area of 400 square kilometers held by African Aura in Western Liberia.During the year ended 31 December 2008, the decision was made to cease the exploration joint venturewith African Aura as it was not seen as a feasible production site in the then current economic climate.An impairment provision has been made against all capitalised exploration costs incurred to date.Petra Diamonds Limited Joint Venture – Kono projectOn 10 September 2004, a joint venture agreement was entered into with Petra Diamonds Limited(“Petra”) for the production of diamonds from the underground mining of diamond-bearing kimberlitedykes (the “Lion” dykes) defined within three contiguous licence areas (Yengema, Njaiama andNimini South) in the Kono diamond district (“Kono Licences”) of Sierra Leone.Under the terms of the agreement, Petra has earned a 51 per cent. interest in Basam Diamonds Limitedby spending $3,000,000 over three years. From 1 January 2009, Stellar has elected to fund theKono project for the calendar year on a sole risk basis and will reinvest all diamond sales revenues inthe continued development of the project.At the end of 2009, Petra will have the option to reimburse Stellar 51 per cent. of the project costs tomaintain its 51 per cent. equity in the project, or dilute.In May 2009 the project was placed under care and maintenance due to the adverse diamond market andPetra has chosen to dilute rather than maintain their 51 per cent. share of the project.The balance owing to Petra as at 30 September 2009, including accrued interest, is $716,000(2008: $718,000, 2007: $260,000).BHP Billiton Joint Venture – Socerdemi projectOn 4 December 2007, Stellar signed a memorandum of understanding with BHP Billiton overexploration licences in the north of the Democratic Republic of Congo.In February 2009, an agreement was reached with BHP Billiton to terminate the joint venture as it wasnot seen as an economically viable project.An impairment provision has been made against all capitalised exploration costs incurred to date.REMEC Joint VentureOn 27 August 2007, Stellar signed a memorandum of understanding with REMEC, aDemocratic Republic of Congo company, over exploration licences in the northern region of theDemocratic Republic of Congo near the town of Panga.241

NOTES TO THE FINANCIAL INFORMATIONIn April 2009, a notice of termination was given to REMEC to terminate the joint venture as it was notseen as an economically viable diamond project.An impairment provision has been made against all capitalised exploration costs incurred to date.21. Related partiesStellar’s parent company is African Aura. During the eight-month period ended 31 December 2007, theyear ended 31 December 2008 and the nine-month period ended 30 September 2009, Stellar and itssubsidiaries, in the ordinary course of business, entered into various transactions with African Aura.These transactions occurred under terms and conditions that are no less favourable than those arrangedwith third parties. As at 30 September 2009, African Aura has also provided a guarantee over $716,000(2008: $718,000, 2007: $260,000) of the total amounts due to joint venture partners.Transactions with other related parties have arisen within the normal course of business and are payableon demand unless otherwise stated.The following summarises the related party transactions:8 months Year 9 monthsended ended ended31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000African Aura – parent company:– management fees 217 391 113– issuance of convertible loans — — 200Associated company – Friendship Diamonds Guineé SA — 129 —Directors – Ordinary shares in Stellar granted at nilconsideration — — 205Directors’ fees — 186 290217 706 808Stellar also transferred certain subsidiaries to a fellow subsidiary as set out in note 23.At 31 December 2007, 31 December 2008 and 30 September 2009, the amounts payable to relatedparties were as follows:31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Directors 21 74 120African Aura 217 — —Joint venture partners 274 824 716512 898 836At 31 December 2007, 31 December 2008 and 30 September 2009, the amounts due from relatedparties were as follows:31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000African Aura 926 906 359Associated company – Friendship Diamonds Guineé SA — 129 129926 1,035 488242

NOTES TO THE FINANCIAL INFORMATIONThe amount receivable from Friendship Diamonds Guineé SA was repaid on 30 October 2009 as set outin note 24. Non-Executive Directors’ expenses are set out in note 6. Remuneration of key managementpersonnel is included in note 7.22. Financial instrumentsIn the normal course of its operations, Stellar is exposed to commodity prices, currency, interest rates,liquidity and credit risk.The fair value of a financial instrument is defined as the amount at which the instrument could beexchanged in a current transaction between willing parties, other than in a forced or liquidation sale.The fair values of these financial instruments are estimates to approximate their carrying values due totheir immediate or short-term nature.Stellar’s financial instruments are:• cash and cash equivalents; and• receivables;• trade and other payables; and• convertible loans.The carrying amounts for the financial instruments are as follows:31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Financial assetsLoans and receivables, measured at amortised cost– cash and cash equivalents 1,716 2,377 419– receivables 938 1,194 4882,654 3,571 90731 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Financial liabilitiesOther liabilities, measured at amortised cost– trade and other payables 1,470 1,336 1,093– convertible loans — — 928Financial liabilities at fair value through profit or loss– derivative financial instruments — — 381,470 1,336 2,059Foreign currency riskIn the normal course of business, Stellar enters into transactions denominated in foreign currencies(primarily British Pounds Sterling and South African Rand). As a result, Stellar is subject to exposurefrom fluctuations in foreign currency exchange rates. In general, Stellar does not enter into derivativesto manage these currency risks. Stellar attempts to reduce its exposure to currency risk by entering intocontracts denominated in United States Dollars whenever possible. Stellar has taken no other action toreduce its exposure to foreign currency risk during the eight-month period ended 31 December 2007,the year ended 31 December 2008 and the nine-month period ended 30 September 2009.243

NOTES TO THE FINANCIAL INFORMATION31 December 31 December 30 SeptemberCarrying value of foreign currency balances 2007 2008 2009$’000 $’000 $’000Cash and cash equivalents include balancesdenominated in:– British Pounds Sterling 1,535 1,120 137Receivables include balances denominated in:– British Pounds Sterling — 152 —Trade and other payables include balances denominated in:– British Pounds Sterling 215 125 151– South African Rand — — 161The sensitivities set out below are based on financial assets and liabilities held at 30 September 2009where balances were not denominated in the functional currency of Stellar (being United StatesDollars). The sensitivities do not take into account Stellar’s income and expenses and the results of thesensitivities could change due to other factors such as changes in the value of financial assets andliabilities as a result of non-foreign exchange influenced factors.Effect on netClosing assets of USDexchange rate strengthening 10%As at 30 September 2009– British Pounds Sterling 0.632 (872)– South African Rand 8.149 (1,972)As at 31 December 2008– British Pounds Sterling 0.691 (115)As at 31 December 2007– British Pounds Sterling 0.5009 (132)Interest rate and liquidity riskFluctuations in interest rates impact on the value of short-term cash investments and interest payable onfinancing activities (including long-term loans), giving rise to interest rate risk. Stellar has in the pastbeen able to source financing through private offerings. This cash is managed to ensure surplus fundsare invested in a manner to achieve maximum returns while minimising risks. In the ordinary course ofbusiness, Stellar is required to fund working capital and capital requirements. Stellar typically holdsfinancial assets with a maturity of less than 30 days to ensure adequate liquidity and flexibility.Due to the short maturity of the financial assets, if interest rates were to double, it would have aninsignificant impact on Stellar’s financial performance.Stellar manages its liquidity risk associated with its financial liabilities through the issuance ofadditional equity, as required to meet the capital requirements of maturing liabilities. Stellar has nolong-term financial liabilities, and remaining financial liabilities, consisting of trade and other payables,are expected to be realised within one year. Net liquidity at 31 December 2007, 31 December 2008 and30 September 2009 is set out below:31 December 31 December 30 SeptemberNet liquidity 2007 2008 2009$’000 $’000 $’000Cash and cash equivalents 1,716 2,377 419Receivables 938 1,194 488Inventories — — 501Current convertible loans — — (537)Trade and other payables (1,470) (1,336) (1,093)1,184 2,235 (222)244

NOTES TO THE FINANCIAL INFORMATIONConvertible loans – issued 1 May 2009On 1 May 2009, Stellar issued convertible loan notes (secured on Mandala mining assets) and raised$575,000. The notes are repayable on 31 January 2010 and bear interest of 20 per cent. per annum. Theprincipal amount is convertible by the holders into Ordinary shares of Stellar at a conversion price of£0.20 per Ordinary share at any time prior to maturity. Subject to the lender converting their loan andinterest for equity, a warrant will be issued for every Ordinary share received at a conversion price of£0.25 per Ordinary share and expiring on 30 June 2010.As the conversion option is denominated in foreign currency terms such that the option will not besettled by Stellar exchanging a fixed number of its own equity instruments for a fixed amount of cash,the convertible loan notes do not meet the definition of a compound financial instrument. Instead theconvertible loan notes (the host contracts) are hybrid financial instruments and the option to convert isan embedded derivative. The host contract carrying value on initial recognition is based on the netproceeds of issuance of the convertible loan note reduced by the fair value of the embedded derivativesand is subsequently carried at each reporting date at amortised cost.The embedded derivatives are separated from the host contract as their risks and characteristics are notclosely related to those of the host contract and the host contract is not carried at fair value. At eachreporting date the embedded derivatives are measured at fair value with changes in fair value recognisedin the statement of comprehensive income as they arise. The embedded derivatives ($38,000) and hostcontract ($537,000) are presented under separate headings in the statement of financial position.Convertible loans – issued 21 September 2009On 21 September 2009, Stellar issued convertible loan notes (secured on Mandala mining assets) andraised £300,000 ($478,000). The convertible loan notes are repayable on 21 January 2011 and bearinterest of 16.5 per cent. per annum. The principal amount is convertible by the holders into commonshares of Stellar at a conversion price of the lesser of the IPO price or £0.20 per share at any time priorto maturity. The holder will be issued one share purchase warrant for each Ordinary share issuedpursuant to the conversion which shall be exercisable at the lesser of £0.25 per Ordinary share or a25 per cent. premium to the IPO price per Ordinary share expiring twenty-four months after IPO.The proceeds received on issue of these convertible loan notes were allocated into their liability($390,000) and equity ($88,000) components and presented separately in the statement of financialposition. The amount initially attributed to the debt component equals the discounted cash flows usinga market rate of interest that would be payable on a similar debt instrument that did not include an optionto convert. The difference between the net proceeds of the convertible debt and the amount allocated tothe debt component is credited direct to equity and is not subsequently re-measured. On conversion, thedebt and equity elements are credited to share capital and share premium as appropriate. Transactioncosts that relate to the issue of the instruments are allocated to the liability and equity components ofthe instruments in proportion to the allocation of proceeds.Credit riskThe maximum credit exposure of Stellar as at 30 September 2009 amounted to $907,000(2008: $3,571,000, 2007: $2,654,000) relating to Stellar’s cash and cash equivalents and receivables.Stellar has limited exposure to credit risk, as the majority of its receivables are due from related partiesand Stellar’s cash and cash equivalents are held with major financial institutions. Historically, Stellarhas not had collection issues associated with its receivables and the aging of receivables are reviewedon a regular basis to ensure the timely collection of amounts owing to Stellar.245

NOTES TO THE FINANCIAL INFORMATIONStellar manages its credit risk in cash and cash equivalents by holding surplus funds in high credit worthyfinancial institution and maintains minimum balances with financial institutions in remote locations.31 December 31 December 30 September2007 2008 2009$’000 $’000 $’000Financial institutions with S&P AA rating or higher 1,535 2,004 272Financial institutions un-rated or unknown rating 181 372 1471,716 2,376 419Capital risk managementStellar’s objectives when managing capital is to maintain its ability to continue as a going concern inorder to provide returns for shareholders and benefits for other stakeholders and to ensure sufficientresources are available to meet day to day operating requirements.Stellar’s Board of Directors takes full responsibility for managing Stellar’s capital and does so throughBoard meetings, review of financial information and regular communication with officers andsenior management.Stellar expects its current capital resources will be sufficient to carry out its plans and operationsthrough its current operating period.Stellar is not subject to externally imposed capital requirements and there has been no change in theoverall capital risk management as at 30 September 2009.23. Transfer of subsidiariesDuring the nine-month period ended 30 September 2009, Stellar transferred its share in the followingsubsidiaries to Mano Diamonds Limited, a subsidiary of African Aura, at their carrying values (beingcash of $12,000 and liabilities of $12,000):Place ofPercentageDate of transfer Company incorporation ownership30 April 2009 Western Mineral Resources Corporation Inc Tortola, BVI 100%(and its subsidiaries):– Western Mineral Resources Corp (Liberia) Monrovia, Liberia 100%– Alpha Minerals Inc Monrovia, Liberia 100%5 June 2009 Weasua Diamonds Ltd Mahe, Seychelles 50%(and its subsidiary):– KPO Resources Inc Monrovia, Liberia 100%24. Subsequent eventsOn 30 October 2009, Stellar acquired 70 per cent. of the issued share capital of Friendship DiamondsGuineé SA from African Aura. The consideration comprised the writing off of $129,000 debt due byAfrican Aura to Stellar at this date. On the same day, the remaining 30 per cent. of the issued sharecapital of Friendship Diamonds Guineé SA was acquired from Compagnie des Diamants Etoiles SA.Consideration comprised the issue of 167,300 Ordinary shares of 1p each at 20p per share, valuing the30 per cent. shareholding at $55,000 (£33,000).246

NOTES TO THE FINANCIAL INFORMATIONThe Directors have taken the decision to wind up the following subsidiaries:PercentageCompany Place of incorporation ownershipEast Sierra Diamonds Limited Mahe, Seychelles 100%(and its branch):– East Sierra Diamonds Limited Freetown, Sierra Leone 100%Diamantes du Congo Oriental Limited Tortola, BVI 100%Mano Diamonds (Sierra Leone) Limited Freetown, Sierra Leone 100%Stellar Diamonds Congo SPRL Democratic Republic of Congo 99.9%Mano Diamonds (Liberia) Inc Monrovia, Liberia 100%25. Parent undertakings and ultimate controlling partyAs at 30 September 2009, the ultimate parent company of Stellar was African Aura, a companyregistered in Canada.As at 30 September 2009, the ultimate controlling party was African Aura.26. Nature of the financial informationThe financial information presented above does not constitute statutory accounts for the eight-monthperiod ended 31 December 2007, the year ended 31 December 2008 and the nine-month period ended30 September 2009.247

PART IXUNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED NET ASSETSThe Existing Directors and Proposed DirectorsWest African Diamonds Plc20-22 Bedford RoadLondonWC1R 4JSThe DirectorsRoyal Bank of Canada Europe Limited71 Queen Victoria StreetLondonEC4V 4DEDear Sirs27 January 2010IntroductionWe report on the unaudited pro forma financial information set out in Part IX of the AIM AdmissionDocument (the “Document”) dated 27 January 2010 of West African Diamonds Plc (the “Company”)which has been prepared on the basis of the notes thereto, for illustrative purposes only, to provideinformation about how the acquisition of the entire issued share capital of Stellar Diamonds Limitedand the Placing on 22 February 2010 might have affected the financial information presented on thebasis of the accounting policies adopted by the Company in preparing its consolidated financialinformation as at and for the period ended 31 October 2009.ResponsibilitiesIt is the responsibility of the Existing Directors and Proposed Directors of the Company to prepare theunaudited pro forma financial information. It is our responsibility to form an opinion on the financialinformation as to the proper compilation of the unaudited pro forma financial information and to reportour opinion to you.In providing this opinion we are not updating or refreshing any reports or opinions previously made byus on any financial information used in the compilation of the unaudited pro forma financialinformation, nor do we accept responsibility for such reports or opinions beyond that owed to those towhom those reports or opinions were addressed by us at the dates of their issue.Basis of opinionWe conducted our work in accordance with the Standards for Investment Reporting issued by theAuditing Practices Board in the United Kingdom. The work that we performed for the purpose ofmaking this report, which involved no independent examination of any of the underlying financialinformation, consisted primarily of comparing the unadjusted financial information with the sourcedocuments, considering the evidence supporting the adjustments and discussing the unaudited proforma financial information with the Existing Directors and Proposed Directors of the Company.We planned and performed our work so as to obtain all the information and explanations we considerednecessary in order to provide us with reasonable assurance that the unaudited pro forma financialinformation has been properly compiled on the basis stated and that such basis is consistent with theaccounting policies of the Company.248

OpinionIn our opinion:(a)(b)the unaudited pro forma financial information has been properly complied on the basis stated; andsuch basis is consistent with the accounting policies of the Company.DeclarationWe are responsible for this report as part of the Document and declare that we have taken all reasonablecare to ensure that the information contained in this report is, to the best of our knowledge, inaccordance with the facts and contains no omission likely to affect its import.Yours faithfullyMazars LLP249

UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED NET ASSETSSet out below is an unaudited pro forma statement of net assets of West African Diamonds Plc (the“Company”), which has been prepared on the basis of the Company’s unaudited interim financialinformation for the six-month period ended 31 October 2009 as adjusted for the acquisition of the entireissued share capital of Stellar Diamonds Limited (“Stellar”) and the Placing, as set out in the notes below.The unaudited pro forma has been prepared for illustrative purposes only and, because of its nature, willnot represent the actual consolidated financial position of the Company at the date of Admission.The Acquisition PlacingCompany of Stellar proceeds Pro formaNote 1 Note 2 Note 3 net assets$’000 $’000 $’000 $’000Non-current assetsIntangible assets 15,826 2,781 — 18,607Property, plant and machinery 2,450 10,974 — 13,42418,276 13,755 — 32,031Current assetsInventories — 501 — 501Trade and other receivables 208 488 — 696Cash at bank and in hand 117 419 7,108 7,644325 1,408 7,108 8,841Total assets 18,601 15,163 7,108 40,872Non-current liabilitiesConvertible loan notes — (390) — (390)Provision — (54) — (54)— (444) — (444)Current liabilitiesTrade and other payables (314) (377) — (691)Other liabilities — (716) — (716)Convertible loan notes — (537) — (537)Derivative financial instruments — (38) — (38)(314) (1,668) — (1,982)Total liabilities (314) (2,112) — (2,426)Net assets 18,287 13,051 7,108 38,446Notes:1 The unaudited interim balance sheet of the Company as at 31 October 2009 has been extracted without adjustment from theCompany’s interim announcement set out in Part VII of the Admission Document and translated into US Dollars at the rate of$1.65:£1. No account has been taken of the activities of the Company subsequent to 31 October 2009.2. The acquisition of Stellar represents the issue of 269,842,557 new Ordinary shares of 1p each at 3.875p each for the entireissued share capital of Stellar. The issue of new Ordinary shares will represent approximately 75 per cent. of the issued sharecapital of the Company prior to the Placing. The value ascribed to the Stellar share capital is $17,253,000 (£10,456,000). Thenet assets acquired on acquisition of Stellar have been extracted without adjustment from the audited interim balance sheet ofStellar as at 30 September 2009 as set out in Part VIII of the Admission Document. No account has been taken of the activitiesof Stellar subsequent to 30 September 2009.3. Placing proceeds represent the Placing by the Company on 22 February 2010 of 25,000,000 new Ordinary shares of 1p each at20p per share, raising £5,000,000 ($8,250,000 at an exchange rate of $1.65 to £1). Associated costs of the Placing were£692,000 ($1,142,000 at an exchange rate of $1.65 to £1).4. The Share Consolidation does not affect the unaudited pro forma statement of consolidated net assets.250

PART XADDITIONAL INFORMATION1. Responsibility1.1 The Company, the Existing Directors and the Proposed Directors whose names appear on page 4of this document, accept responsibility for all the information contained in this document,including individual and collective responsibility for compliance with the AIM Rules. To the bestof the knowledge and belief of the Company, the Existing Directors and the Proposed Directors(who have taken all reasonable care to ensure that such is the case), the information contained inthis document is in accordance with the facts and does not omit anything likely to affect theimport of such information.1.2 MPH Consulting Limited accepts responsibility for its report set out in Part VI of this document.To the best of the knowledge of MPH (which has taken all reasonable care to ensure that such isthe case), the information contained in such report is in accordance with the facts and does notomit anything likely to affect the import of such information.1.3 Mazars LLP accepts responsibility for its reports set out in Parts VIII and IX of this document.To the best of the knowledge of Mazars (which has taken all reasonable care to ensure that suchis the case), the information contained in such report is in accordance with the facts and does notomit anything likely to affect the import of such information.2. The Company2.1 The Company was incorporated on 14 April 2005 in England and Wales under the CompaniesAct 1985 with registration number 5424214 under the name West African Diamonds plc.2.2 The liability of the members of the Company is limited.2.3 The registered office of the Company is 20-22 Bedford Row, London WC1R 4JS. The principalplace of business of the Company following the Admission will be at 32 Bloomsbury Street,London WC1B BQJ, and its telephone number is +44 (0) 20 7299 4212.2.4 The Company’s main activity is that of investment in mining and mineral exploration andproduction in West Africa.2.5 The Company is a holding company and prior to Admission has two wholly owned subsidiaries,Castlebay Resources Limited and Grampian Resources Limited. Following Admission theCompany will have nine wholly owned, either directly or indirectly, subsidiaries, and a49 per cent. holding in a joint venture company, Basama Diamonds Limited (Seychelles), theother joint venture partner being Petra. Basama Diamonds Limited (Seychelles) wholly owns asubsidiary, Basama Diamonds Limited (Sierra Leone) which owns the Kono Project. The detailsof the relevant companies are set out below:Country of Principal Percentage owned byName Authorised Share Capital Incorporation activity the CompanyCastlebay £100 divided into 100 Scotland Mining and 100%Resources ordinary shares of £1 each quarryingLimitedactivitiesGrampian £100,000 divided into England and Mining and 100%Resources 100,000 ordinary shares Wales quarryingLimited of £1 each activitiesStellar £5,000,000 divided into Guernsey Diamond 100%Diamonds 500,000,000 ordinary exploration andLimited shares of £0.01 each production251

Country of Principal Percentage owned byName Authorised Share Capital Incorporation activity the CompanyGuinean Diamond US$5,000,000 divided Seychelles Diamond 100% through StellarCorporation into 5,000,000 ordinary exploration Diamonds LimitedLimited shares of US$1 eachFriendship 50,000,000 GNF divided Guinea Diamond 100% through GuineanDiamond into 2,500 ordinary shares exploration Diamond CorporationGuinée SA of 20,000 GNF each LimitedMano River 50,000,000 GNF divided Guinea Diamond 100% through GuineanDiamants into 2,500 ordinary exploration Diamond CorporationGuinée SA shares of 20,000 GNF each LimitedRessources 5,000,000 GNF divided Guinea Diamond 100% through GuineanMandela into 500 ordinary shares exploration Diamond CorporationGuinée SARL of 10,000 GNF each LimitedBasama US$50,000.00 divided into Seychelles Diamond 49% through StellarDiamonds 5,000,000 ordinary exploration Diamonds LimitedLimited shares of US$0.01 eachBasama US$50,000.00 divided Sierra Leone Diamond 100% through BasamaDiamonds into 5,000,000 ordinary exploration Diamonds LimitedLimited shares of US$0.01 each (Seychelles)Sierra US$50,000,000 divided British Virgin Diamond 100% through StellarDiamonds into 50,000 ordinary Islands exploration Diamonds LimitedLimited shares of US$1 eachSierra US$50,000,000 divided Sierra Leone Diamond 100% through SierraDiamonds into 50,000 ordinary exploration Diamonds LimitedLimited shares of US$1 eachMano Diamonds Le. 10,000,000 divided into Sierra Leone Inactive 100% through Stellar(SL) Limited 10,000,000 ordinary shares company Diamonds Limitedof Le. 1 eachMano Diamonds 100 shares of common Liberia Inactive 100% through Stellar(Liberia) Inc stock of no par value company Diamonds LimitedDiamants du 50,000 shares of no par British Virgin Inactive 100% through StellarCongo Oriental Ltd value Islands company Diamonds LimitedStellar Diamants US$100,000 shares of $100 Democratic Inactive 100% through Diamants duCongo SPRL each Republic of company Congo Oriental Ltd andCongoStellar Diamonds Limited2.6 Following Admission, the Enlarged Group and its subsidiaries will have approximately285 employees. The geographic location and nature of activity of such employees is set out inthe table below:Number of Employees Geographic Location Main Category of Activity22 Sierra Leone Exploration254 Guinea Production and Exploration5 UK Finance Director and Non-ExecutiveDirectors3 South Africa CEO and Non-Executive Director1 Malta COO252

3. Share Capital3.1 The capital history of the Company from the date of the Company’s incorporation to the date ofthis document is as follows:3.1.1 At the date of incorporation, the authorised share capital of the Company was £1,000,000,divided into 1,000,000 ordinary shares of £1.00 each, of which 2 shares of £1.00 each werein issue fully paid or credited as fully paid to the subscribers of the Company’smemorandum.3.1.2 On 24 August 2006, Shareholder resolutions were passed to;3.1.2.1 subdivide the two subscriber shares of £1.00 each into two hundred ordinaryshares of £0.01 each;3.1.2.2 subdivide the 999,998 authorised but unissued ordinary shares in the capital of theCompany of £1 each into 99,999,800 ordinary shares of £0.01 each; and3.1.2.3 increase the authorised share capital of the Company from £1,000,000 divided into100,000,000 ordinary shares of £0.01 each to £2,000,000 divided into 200,000,000ordinary shares of £0.01 each by the creation of 100,000,000 ordinary shares of£0.01 each;3.1.2.4 generally and unconditionally authorise the Company’s, directors pursuant toSection 80 of the Companies Act, 1985 to allot relevant securities (as defined inthat section) up to the authorised but as yet unissued share capital of the Companyfrom time to time, such authority to expire on the fifth anniversary from the dateof the resolution; and3.1.2.5 empower the directors of the Company pursuant to Section 95 of the CompaniesAct, 1985 to allot equity securities (as defined in Section 94 of that Act) for cashpursuant to the authority referred to at 3.1.2.4 above as if subsection (i) ofSection 89 of that Act did not apply to any such allotment. The authority expireson the fifth anniversary from the date of the resolution.3.1.3 Since incorporation the following changes have been made to the issued share capital ofthe Company:• the allotment of 20,069,785 Existing Ordinary Shares at £0.20 per Existing OrdinaryShare on 26 October 2006;• the allotment of 13,500,000 Existing Ordinary Shares at £0.20 per Existing OrdinaryShare on 5 January 2007;• the allotment of 2,526,773 Existing Ordinary Shares at £0.24 per Existing OrdinaryShare on 18 July 2007;• the allotment of 4,029,000 Existing Ordinary Shares at £0.21 per Existing OrdinaryShare on 19 September 2007;• the allotment of 625,000 Existing Ordinary Shares at £0.20 per Existing OrdinaryShare on 27 March 2008;• the allotment of 15,400,000 Existing Ordinary Shares at £0.10 per Existing OrdinaryShare on 6 October 2008;• the allotment of 2,000,000 Existing Ordinary Shares at £0.10 per Existing OrdinaryShare on 31 October 2008;253

• the allotment of 10,130,086 Existing Ordinary Shares at £0.04 per Existing OrdinaryShare on 24 February 2009; and• the allotment of 21,666,675 Existing Ordinary Shares at £0.03 per Existing OrdinaryShare on 6 August 2009.3.2 Save as referred to in paragraphs 4, 5 and 6 below of this Part X no share or loan capital of theCompany is under option or has been agreed, conditionally or unconditionally, to be put underoption, and there are in issue no convertible securities.3.3 There are no shares not representing share capital and there are no Existing Ordinary Shares, norwill there be any Ordinary Shares at Admission, held by or on behalf of the Company or by any ofthe Company’s subsidiary undertakings.3.4 There is no class of shares in issue other than ordinary shares.3.5 No Existing Ordinary Shares are issued other than as fully paid.3.6 In accordance with the Existing Articles, the authorised but unissued Existing Ordinary Sharesare placed under the control of the Existing Directors.3.7 The Existing Ordinary Shares and the Ordinary Shares at Admission will be, in registered formand may be held in either certificated or uncertificated form.3.8 Pursuant to the terms of the Acquisition, more than 10 per cent. of the Company’s share capitalwill be paid for with assets other than cash.3.9 The Placing will result in the issue of 25,000,000 Placing Shares, and the Acquisition will resultin the issue of 53,598,390 Consideration Shares, assuming all Stellar Loan Note Holders converttheir outstanding principal and interest into Stellar Shares at Completion which are immediatelyacquired by WAD in consideration for Consideration Shares. Resolutions to authorise theallotment and issue of the New Ordinary Shares are set out in the Notice of General Meeting inPart XI of this document.3.10 The Company’s authorised and issued share capital at the date of this document is, and is expectedto be immediately following Admission, as follows:As at the date of this documentAs at AdmissionNominal Value Number of Ordinary Nominal Number of Consolidated(£) Shares in issue Value (£) Ordinary Shares in issueAuthorised 2,000,000.00 200,000,000 — — (1)Issued 899,475.19 (2) 89,947,519 (2) 4,846,582.90 96,931,658(1) Assuming the New Articles are adopted and no authorised capital is required any longer.(2) This number will increase immediately before Completion by 1,718,821 of Existing Ordinary Shares which will beallotted to the Existing Directors in satisfaction of outstanding remuneration due to them to the end of February 2010.3.11 The share capital reconciliation as required to be disclosed in accordance with the AIM Rules isas follows:As at start of financial yearAs at end of financial year1 May 2008 30 April 2009Issued Existing Ordinary Shares 40,750,758 68,280,8444. Share Options4.1 To motivate the Company’s directors and employees, the Existing Board has adopted anunapproved option scheme to authorise the Company to issue share options to directorsand employees.254

4.2 The terms of the Share Option Scheme are as follows:4.2.1 Eligibility4.2.1.1 The Share Option Scheme is available to any officer of the Company, to anyperson employed by the Company, any holding company or any of its subsidiaries(together the “Option Group”) or any person engaged by a member of the OptionGroup to render services to that member of the Option Group (each a“Participant”, together the “Participants”).4.2.1.2 No person shall be entitled as of right to participate in the Share Option Scheme.The decision as to who shall have the opportunity of participating, and the timeand extent of his participation, will be made by the board of directors of theCompany at its absolute discretion.4.2.2 Grant of Options4.2.2.1 At any time while the Share Option Scheme is in operation, the board of directorsof the Company may offer to grant options to such Participants as may benominated by it to subscribe for such number of shares in the capital of theCompany as the board of directors may determine (“Options”). The price for suchshares will be determined by the board at the time of the grant of the relevantOption, such price to be not less than the average closing market price for the sharesin the five dealing days preceding the grant of the Option (the “Option Price”).4.2.2.2 Every such offer shall be conditional upon the Participant returning to theCompany a duly signed notification of acceptance within such time as the boardmay require and if the Participant shall fail to do so within the time so specifiedthe offer shall be deemed to have lapsed.4.2.2.3 Upon receipt by the board of the duly signed notification of acceptance, theCompany shall grant an Option to subscribe for shares under the Share OptionScheme to the Participant.4.2.3 Exercise of Options4.2.3.1 The Option is exercised by returning a notice of exercise, the relevant sum ofmoney to exercise the Option and the relevant Option certificate to the Company.4.2.3.2 As soon as practicable after the receipt of the relevant documents, the Companyshall issue the appropriate number of shares to the Participant together with acertificate for the balance of the Participants’ Options (if applicable).4.2.4 Limitations on Issue and Exercise4.2.4.1 The aggregate number of shares issued under or pursuant to Options granted underthe Share Option Scheme shall not exceed 15 per cent. of the shares issued in thecapital of the Company from time to time.4.2.4.2 No option granted under the Share Option Scheme shall be exercisable after theParticipant shall cease to hold the employment by virtue of which he/she wasinvited to participate in the Share Option Scheme (subject to the Company’sdiscretion to allow a vested Option to remain exercisable).4.2.4.3 If a Participant dies, his/her legal personal representative may exercise his/herOptions granted under the Share Option Scheme which have vested in whole, orin part, at any time within twelve months from the date of his death or such longerperiod as the board may determine in any particular case.4.2.4.4 No option granted under the Share Option Scheme shall be capable of beingexercised more than seven years after the date upon which it was granted.255

4.2.4.5 Each Option granted under the Share Option Scheme shall be subject to suchvesting period and performance conditions as the board may decide.4.2.4.6 The Company shall keep available sufficient unissued ordinary shares in thecapital of the Company to satisfy any outstanding Options for duration of theShare Option Scheme.4.2.5 Indemnity4.2.5.1 Each Participant agrees to indemnify the Company against any tax or socialsecurity liability arising to the Company in respect of the exercise by thatParticipant of his options (the “Liability”).4.2.5.2 Where any Liability arises to the Company and within 14 days it fails to recoverfrom the Participant under the indemnity referred to above, the Company shall bedeemed to have been appointed the Participant’s attorney with full power tocomplete the sale of the Participant’s shares and to retain from the proceeds suchamount as is equal to the tax or security liability of the Company.4.2.6 Changes in Capitalisation4.2.6.1 In the event of a stock split, reverse stock split, stock dividend, combination orreclassification of the ordinary shares in the capital of the Company or any otherincrease or decrease in the number of issued ordinary shares effected withoutreceipt of consideration, the number of unexercised Option shares and the numberof shares authorised under the Share Option Scheme under which no Options havebeen granted may, subject to any action required by the shareholders, beproportionately adjusted by the board of directors.4.2.7 Takeovers and Liquidation4.2.7.1 If any person becomes interested (whether alone or in concert with others) in morethan 50 per cent. of the issued or voting capital of the Company (“Control”) as aresult of making a general offer to acquire the whole of the issued ordinary sharecapital of the Company, all Options may be exercised at any time within six monthsof the date when the person making the offer has obtained Control of the Companyand thereafter all Options shall lapse. If the Company passes a resolution forvoluntary winding up, all Options may be exercised within six months of thepassing of the resolution and thereafter, all options shall lapse.4.2.8 Exchange of Options on a Takeover4.2.8.1 If any company obtains Control of the Company or becomes bound or entitled toacquire shares in the Company within the circumstances specified above, aParticipant may within the period specified for the exercise of an Option, releasehis/her Option (the “Old Option”) in consideration of the grant of a new option(the “New Option”) equivalent in value to the Old Option.4.2.8.2 New Options granted pursuant to 4.2.8.1 above shall be regarded for the purposesof subsequent applications of the provisions of the Option Scheme as having beengranted at the time that the corresponding Old Options were granted.4.2.9 Overseas ParticipantsIn respect of the Participants who are or may become primarily subject to taxation outsidethe United Kingdom on their remuneration, the board may amend the provisions of theShare Option Scheme as it considers necessary or desirable to mitigate, take account of orcomply with overseas taxations, securities or exchange control laws provided that the terms256

of the options provided to such Participants shall not be more favourable than the terms ofthe options granted to the other Participants and the Share Option Scheme limit referred toin paragraph 4.2.4.1 is not exceeded.4.3 Under the Share Option Scheme there are 7,100,000 Options outstanding as at the date of thisdocument (prior to the Share Consolidation). The table below sets out the varying exercise pricesand dates on which these Options will expire. The Share Option Scheme provides that no Optiongranted shall be exercisable after the participant ceases to hold employment, subject to theCompany’s discretion to allow a vested Option to remain exercisable. It has been agreed at ameeting of the Existing Board held on 10 January 2010 that the Options granted to formeremployees/consultants would remain exercisable for a period of one year from the date of themeeting and all other remaining Options would continue to remain exercisable for a period ofseven years from the date of grant of the relevant Option.Under the terms of the Share Option Scheme, on account of the Share Consolidation, the numberof these Options will be divided by 5 and the respective exercise prices multiplied by 5, with theresults as set out in the table.4.4 Pursuant to the terms of the Acquisition Steller Option Holders will surrender their StellarOptions (of which there are 3,992,500 outstanding) conditional upon the grant at Admission ofthe issue of new Options (4,012,463 in aggregate) to subscribe for Consolidated Ordinary Shares.Further details of these arrangements are set out in paragraph 8 of Part I of this document. Thetable below therefore also sets out the details of Options that will be outstanding immediatelyfollowing Admission for both existing holders and former Stellar Option Holders, each on thebasis that the Share Consolidation has taken place, amounting to 5,432,463 in total.As at the date of this documentAs at AdmissionNumber ofNumber ofExisting OrdinaryConsolidatedExercise Shares under Ordinary Shares ExercisePrice (p) option Expiry Date under option Price(p) Expiry Date20 2,000,000 15.09.13 400,000 100 15.09.1320 500,000 01.12.13 100,000 100 01.12.1320 100,000 08.02.14 20,000 100 08.02.1420 500,000 10.01.11 100,000 100 10.01.1123.5 400,000 10.01.11 80,000 117.5 10.01.1123.5 100,000 10.04.14 20,000 117.5 10.04.1423 200,000 17.07.14 40,000 115 17.07.1424.25 300,000 10.01.11 60,000 121.25 10.01.113 3,000,000 23.07.16 600,000 15 23.07.163,482,325 20 seven yearsfrom Admission530,138 87.54 seven yearsfrom AdmissionTOTAL 7,100,000 5,432,4634.5 Following Admission, all Options will be governed by the terms of the Share Option Scheme,certain proposed amendments to which are to be approved by Shareholders at the General Meeting.4.6 The following amendments are proposed to be made to the Share Option Scheme:4.6.1 references to the Companies Act 1985 are be changed to references to the relevantprovisions in the Companies Act 2006;4.6.2 the Share Option Scheme will provide that if an Option becomes exercisable as a result ofanother person acquiring Control of the Company, then the exercise of the Option will takeeffect six months after completion of such change of Control. If an option is exercised aftersuch change of Control, the Company may not enjoy a deduction for the purposes ofcorporation tax on the difference between the exercise price of the Option and the marketvalue of the shares subject to the Option on the date of exercise (the “Option Gain”). Toensure that the deduction for corporation tax on the Option Gain is available to the257

Company, the Option must be exercised before the change of Control takes place and theShare Option Scheme will be amended to give the board the discretion to allow for Optionsto be exercised before such change of Control;4.6.3 the Share Option Scheme will be amended to ensure that an Option is not exercisable if achange of Control is pursuant to a reorganisation where there is no change in the ultimatebeneficial ownership of the Company and the Option holders are offered replacementoptions in the acquiring company;4.6.4 the Share Option Scheme will be amended to allow the board to make the valid exercise ofan Option dependent on the Option holder completing a Section 431 election. The sharesacquired under the Option will be employment related securities and there may be anincome tax charge on the earlier of the removal of restrictions on the share or the sale ofsuch shares. By entering into such an election, the tax charge is accelerated to the date ofacquisition but it can be also be reduced or eliminated. Whether it is beneficial to makesuch an election will depend on the circumstances but the Share Option Scheme shouldprompt the board to consider whether such an election is beneficial before the Options areexercised; and4.6.5 to reduce the number of Options which can be granted over the Company’s share capitalfrom 15 per cent. to 10 per cent. of the Company’s share capital.5. New Warrants5.1 Between 29 May 2007 and 12 June 2009, Stellar granted 22,325,570 warrants to subscribe forStellar Shares. As at the date of this document, 18,679,451 of these Stellar Warrants areoutstanding all of which expire on 30 June 2010.Number of Stellar SharesStellar Warrant Holder subject to warrant Exercise Price (£) Expiry DateAltima Global SpecialOpportunities Master Fund 6,940,220 0.25 30 June 2010AM2 (Bermuda) Ltd.c/o MQ Services Ltd 200,000 0.25 30 June 2010Angus Ogilvie 25,000 0.25 30 June 2010Credit Agricole (Suisse) SA 500,000 0.25 30 June 2010Eastbound Resources Limited 165,000 0.25 30 June 2010Luis da Silva 48,815 0.25 30 June 2010Mano Diamonds Limited 10,052,000 0.25 30 June 2010Nicholas Karl Smithson 54,115 0.25 30 June 2010Nortrust Nominees Ltd 550,000 0.25 30 June 2010Steven James Poulton 93,750 0.25 30 June 2010WB Nominees Ltd. 50,550 0.25 30 June 20105.2 In addition, pursuant to a fundraising in March 2008 and a warrant certificate dated31 March 2008, Symonds Securities Limited has been granted a warrant to subscribe for3,500 Stellar Shares in the capital of Stellar at an exercise price of £1.00 per share. This warrantexpires on 31 March 2010.5.3 Warrants to subscribe for a total of 18,682,951 Stellar Shares therefore remain outstanding.5.4 Pursuant to the Acquisition, Stellar Warrant Holders have agreed to cancel their Stellar Warrantsconditional upon New Warrants being granted at Admission to them, the terms of which are setout in paragraph 8 to Part I. Warrants to subscribe for Stellar Shares will also arise onCompletion under the terms of the Stellar Convertible Loan Note, as set out in paragraph 8 ofPart I of this document. As a term of Acquisition those warrants will be immediately becancelled conditional on the grant of New Warrants. In addition, should it exercise its right to258

convert the Stellar Convertible Debt following Admission, Altus has the right to be grantedNew Warrants, exercisable at £0.25 and expiring 24 months later in relation to each OrdinaryShare arising on conversion.5.5 In addition, pursuant to the terms of the RBC Warrant, details of which are set out inparagraph 15.7 of this Part X, RBC has been granted warrants to subscribe for a number ofOrdinary Shares equal to 0.5 per cent. of the gross funds raised in the Placing (excluding anyfunds raised from the Chairman’s List) with an exercise price equal to the Placing Priceexercisable for 24 months from Admission.5.6 At Admission, the following New Warrants and RBC Warrants will therefore be outstanding inthe Enlarged Share Capital:Number ofConsolidated OrdinaryShares subject toNew Warrant Holder warrant Expiry Date Exercise Price (£)Nortrust Nominees Ltd 552,750 30 June 2010 0.251Mano Diamonds Limited 10,102,261 30 June 2010 0.251Credit Agricole (Suisse) SA 502,500 30 June 2010 0.251Altima Global SpecialOpportunities Master Fund 6,974,921 30 June 2010 0.251Eastbound Resources Limited 165,825 30 June 2010 0.251Luis da Silva 49,059 30 June 2010 0.251Nicholas Karl Smithson 54,385 30 June 2010 0.251Steve James Poulton 94,218 30 June 2010 0.251Angus Ogilvie 25,125 30 June 2010 0.251AM2 (Bermuda) Ltd.c/o MQ Services Ltd 201,000 30 June 2010 0.251WB Nominees Ltd. 50,802 30 June 2010 0.251Symonds Securities Limited 3,517 31 March 2010 1.005Stellar Loan Note Holders 2,013,801 30 June 2010 0.251RBC 1,250,000 24 months 0.20after AdmissionAltus* 1,507,500 24 monthsafter Conversion 0.251* Assuming Altus was to convert the Stellar Convertible Debt at the Placing Price.6. Altus6.1 An amendment agreement dated 27 January 2010 has been entered into between Altus, Stellarand the Company pursuant to which the provisions in relation to Altus’ right to convert theprincipal amount owing under the Stellar Convertible Debt have been amended. Incircumstances where Altus chooses to exercise its conversion option, the Company has agreedto immediately acquire Stellar Shares arising upon such a conversion in consideration for theallotment of a number of Ordinary Shares calculated by reference to the Exchange Ratio andthe grant of New Warrants. Further details of the Altus loan note are set out at paragraph 8 toPart I and paragraph 15.10 of this Part X.259

7. Directors7.1 Other than their directorships of the Company, the current directorships and partnerships of theNew Board (comprising the Proposed Directors and James Campbell) and the directorships andpartnerships held by them over the five years prior to the date of this document are as follows:Director Current Directorships/Partnerships Previous Directorships/PartnershipsKarl Smithson Guinean Diamond Corporation Limited Mano River Resources IncBasama Diamonds LimitedKpo Resources IncSierra Diamonds LimitedWestern Mineral Resources CorporationFriendship Diamonds Guinée SA Alpha Minerals IncMano River Diamants Guinée SA East Sierra Diamonds LimitedResources Mandala Guinée SARL Weasua Diamonds LimitedDiamants du Congo Oriental LimitedAngus OgilvieGuinean Diamonds Corporation LtdSteven Poulton Fermont Mining Limited Himalaya Metals LimitedRidgeway Energy LimitedKspm Associates LtdRidgeway Energy SARLAriana Resources PlcAfrican Aura Resources (CAR) Ltd Ariana Exploration & Development LtdAfrican Aura Resources (CAM) Ltd Portswood Resources LtdAfrican Aura Resources (LIB) Ltd Mano River Resources IncAfrican Aura Resources (ZIM) Ltd Sierra Diamonds LtdAfrican Aura Resources (Liberia) Ltd Artemis Diamonds IncAltus Strategies LtdEtoile Diamonds IncAltus Capital LimitedALTUS Asset Management LtdAsterion AV LtdAsian Gold Corporation plcAvance Gold plcArabian Gold Corporation plcArabian Resource Holdings LimitedAsian Gold Ventures LimitedAvance African Group LimitedAvanex SarlAvanor SarlExploration Capital LimitedStellar Diamonds LtdLuis da Silva African Aura Mining Inc NoneStellar Diamonds LtdAiRENA LtdDiamants du Congo Oriental LimitedMano River Iron Ore Holdings LtdMano River Iron Ore LimitedMano River Iron Ores (Guinea) LtdSeverstal Liberia Iron Ore LimitedPutu Iron Ore Mining IncMano Gold Investments LimitedMano Gold (Liberia) LimitedBea Mountain Mining CorporationGolden Leo Resources LimitedMano Diamonds LimitedLord Daresbury Daresbury Dairy Farm Limited De Vere Group LimitedAintree Racecourse Company Limited The Greenalls Group PensionGrand National Steeplechase Limited Trustees LimitedDaresbury Properties LimitedJockey Club Racecourses Limited260

Director Current Directorships/Partnerships Previous Directorships/PartnershipsDelamere Forest Properties LimitedLand Farm Associates (Ternovskoe)Limited (in liquidation)Nasstar (UK) LimitedNasstar PlcCommonside Investments LimitedMallett Public Limited CompanySumatra Copper & Gold PlcDaresbury Restaurants (Greens) LimitedGreen’s (West End) LimitedThe Greenhouse Wine Company LimitedRacecourse Investments LimitedRusant LimitedLewis Carroll Birthplace TrustRoedale LimitedDaresbury Drinks LimitedDaresbury Group LimitedDaresbury Leisure LimitedPaul Rankine None Zambezi Nickel LtdJames Campbell African Diamonds plc NoneSwala Resources plcBugeco SAGondwana Diamonds Pty LtdWati Ventures Pty LtdDebwat Pty LtdAtlas Minerals Pty LtdKukama Mining & Exploration Pty LtdAfrican Coal Pty LtdNaledi Mining & Exploration Pty LtdBoteti Exploration Pty LtdSouth African Ballet Theatre TrustSouth African Ballet TheatreCommon Purpose South Africa7.2 Other than their directorships of the Company, the current directorships and partnerships of theExisting Directors (other than James Campbell) and directorships and partnerships held by themover the five years prior to the date of this document are as follows:Director Current Directorships/Partnerships Previous Directorships/PartnershipsJohn Teeling Arabian Oil Plc Mwana AfricaA.Watt & Company PlcAdam Miller & Company LimitedAfrican Diamonds (Ireland) LtdAfrican Diamonds PlcAlternative Energy Resources LtdAndrew A Watt & Company LtdBoteti Exploration (Pty) LtdBotswana Coal PlcBotswana Diamonds PlcBrosna Whiskey PlcCarlingford Whiskey PlcCastlebay Resources LtdCongo Diamonds PlcConnemara Mining Co. of Ireland LtdConnemara Mining Co. PlcCooley Distillery (NI) LtdCooley Distillery PlcCooley Irish Whiskey LtdEndeavour Oil & Gas IncEndeavour Oil & Gas LtdGrampian Resources Ltd261

Director Current Directorships/Partnerships Previous Directorships/PartnershipsHydrocarbon Exploration PlcInnishowen Distilleries PlcIrish Marine Oil LtdJohn Locke & Company LtdKilbeggan Whiskey LtdKukama Mining & Exploration (Pty) LtdLimerick Zinc LtdLockes Distillery PlcMadini Resources PlcMiller Products LtdNobel Resources PlcOld Tyrconnell Whiskey LtdOrapa Diamonds PlcPan Andean Resources plcPan Andean Oil & Gas LtdPersian Gold LtdPersian Gold PlcPetrel Industries LtdPetrel Resources PlcRiverstown Animal Feed PlcSwala Resources PlcThe Irish Whiskey Company LtdTyrconnell Distillery PlcWhiskey Manufacturing (NI) PlcWhiskey Manufacturing PlcZambezi Gold PlcJames Finn A.Watt & Company Plc NoneAdam Miller & Company LtdAfrican Diamonds (Ireland) LtdAfrican Diamonds PlcAndrew A Watt & Company PlcBotswana Coal PlcBotswana Diamonds PlcBrosna Whiskey PlcCarlingford Whiskey PlcCastlbay Resources LimitedCommemara Mining Co of Ireland LtdCongo Diamonds PlcConnemara Mining Co PlcCooley Distillery PlcCooley Distillery NI LtdCooley Irish Whiskey LtdEndeavour Oil & Gas IncEndeavour Oil & Gas LtdErinex ResourcesGrampian Resources LtdHydrocarbon Exploration PlcInnishowen Distilleries PlcIrish Marine Oil LtdJohn Locke & Company LtdKilbeggan Whiskey LtdLimerick Zinc LtdLockes Distillery PlcMadini Resources Plc262

Director Current Directorships/Partnerships Previous Directorships/PartnershipsMiller Products LtdNobel Resources PlcOld Tryconnell Whiskey LtdOrapa Diamonds PlcPan Andean Oil & Gas LtdPan Andean Resources PlcPersian Gold LtdPersian Gold PlcPetrel Industries LtdRiverstown Animal Feed PlcThe Irish Whiskey Company LtdTyrconnell Distillery PlcWhiskey Manufacturing (NI) PlcWhiskey Manufacturing PlcZambezi Gold PlcAlex van Zyl African Diamonds plc NonePaul Nel SuMa Export (Pty) Ltd NoneRonfa Landgoed (Pty) Ltd7.3 The business address of each of the Existing Directors and each of the Proposed Directors as fromAdmission is:c/o West African Diamonds PLC20-22 Bedford RowLondon WC1R 4JS7.4 As at the date of this document save as described below, none of the Existing Directors orProposed Directors has:7.4.1 any unspent convictions in relation to indictable offences; or7.4.2 been declared bankrupt or made any individual voluntary arrangement; or7.4.3 save as disclosed at 7.6 below, been a director of a company at the time of or within thetwelve months preceding any receivership, compulsory liquidation, creditors’ voluntaryliquidation, administration, voluntary arrangement or any composition or arrangement withcreditors generally or any class of creditors; or7.4.4 been a partner or in a partnership at the time of or within the twelve months preceding thepartnership being subject to a compulsory liquidation, administration or partnershipvoluntary arrangement; or7.4.5 had any asset subject to receivership or been a partner of any partnership at the time of orwithin the twelve months preceding any asset of such partnership being subject to areceivership; or7.4.6 save as disclosed in paragraph 7.5 below, been subject to any public criticism by statutoryor regulatory authorities (including recognised professional bodies), nor disqualified by acourt from acting as a director of a company or from acting in the management or conductof the affairs of any company.7.5 John Teeling was a former director of County Glen plc and following his departure from thatcompany, an inspector was appointed pursuant to section 8 of the Irish Companies Act 1990 toinvestigate the affairs of County Glen plc. In a subsequent report dated July 1994, it was statedthat John Teeling was “open to some criticism for failure to exercise due care as an outgoingdirector”. It was stated that he should have paid greater attention to the qualifications of theincoming directors and their suitability for their positions.263

7.6 Lord Peter Daresbury was a director of the following companies at the time the respectivecompanies were placed into creditors’ voluntary liquidation:• Wetnose.com Limited: Lord Daresbury resigned as a director of the company on 2 October2000 and a liquidator was appointed on 2 November 2000. The company’s statement ofaffairs (dated 24 November 2000) indicates that there was a shortfall to creditors of£147,000 and a deficiency of £1,517,000 in the company’s share capital.• Land Farm Associates (Ternovskoe) Limited: the company entered into voluntaryliquidation pursuant to a group re-organisation and a Notice of Appointment of aLiquidator was filed on 27 October 2008.8. Directors’ and Other Interests8.1 The interests of the Existing Directors and Proposed Directors (all of which are beneficial, unlessotherwise stated), and (so far as is known to the Existing Directors or the Proposed Directors (asthe case may be), or could with reasonable diligence be ascertained by them) the interests ofpersons connected with the Existing Directors or the Proposed Directors, in the ordinary sharecapital of the Company as at 26 January 2010 (being the latest practicable date prior topublication of this document) and as at Admission will be as follows:As at the date of this documentAs at AdmissionNumber of Percentage of Number of Percentage ofExisting Issued Ordinary Consolidated EnlargedOrdinary Shares Share Capital Ordinary Shares Share CapitalProposed DirectorsKarl Smithson None Nil 417,775 0.43Angus Ogilvie None Nil 106,636 0.11Steven Poulton None Nil 263,621 0.27Luis da Silva None Nil 166,439 0.17Lord Daresbury None Nil 2,426,476 2.50Paul Rankine None Nil Nil NilJames Campbell (1) 125,000 0.14 60,430 0.06Existing DirectorsJohn Teeling 2,015,862 2.24 578,171 0.60James Finn 1,547,394 1.72 384,478 0.40Alex van Zyl 1,125,000 1.25 283,335 0.29Paul Nel None Nil Nil Nil8.2 John Teeling, James Finn, Alex van Zyl and James Campbell are also directors of AfricanDiamonds plc which has a 5.56 percentage interest of the issued ordinary share capital of theCompany as at the date of this document.8.3 Save as disclosed above, the Existing Directors and Proposed Directors are not aware of anyinterests of persons connected with them.8.4 The Existing Directors and Proposed Directors are not required to hold any ordinary shares underthe Existing Articles or the New Articles.Notes:(1) James Campbell is an Existing Director of West African Diamonds PLC264

8.5 As at 26 January 2010 (being the latest practicable date prior to publication of this document) and asat Admission the Existing Directors and Proposed Directors (or their connected persons) hold thefollowing options and warrants to subscribe for shares granted pursuant to the Share Option Scheme:As at the date of this documentAs at AdmissionNumber ofNumber ofExistingConsolidatedOrdinaryOrdinaryShares Exercise Expiry Shares Exercise Expiryunder option Price (£) Date under option Price (£) DateProposed DirectorsKarl Smithson None — — 1,306,500 0.20 Seven yearsfrom AdmissionLuis da Silva None — — 603,000 0.20 Seven yearsfrom AdmissionLord Daresbury None — — 402,000 0.20 Seven yearsfrom AdmissionSteven Poulton None — — 402,000 0.20 Seven yearsfrom AdmissionAngus Ogilvie None — — 201,000 0.20 Seven yearsfrom AdmissionPaul Rankine None — — None 0.20 Seven yearsfrom AdmissionJames Campbell 500,000 0.20 01.12.13 100,000 1.00 01.12.13100,000 0.235 10.04.14 20,000 1.17 10.04.14500,000 0.03 23.07.16 100,000 0.15 23.07.16Existing DirectorsJohn Teeling 500,000 0.20 15.09.13 100,000 1.00 15.09.13500,000 0.03 23.07.16 100,000 0.15 23.07.16James Finn 500,000 0.20 15.09.13 100,000 1.00 15.09.13500,000 0.03 23.07.16 100,000 0.15 23.07.16Alex van Zyl 500,000 0.20 15.09.13 100,000 1.00 15.09.13500,000 0.03 23.07.16 100,000 0.15 23.07.16Paul Nel 100,000 0.20 08.02.14 20,000 1.00 08.02.14500,000 0.03 23.07.16 100,000 0.15 23.07.16Number of ExerciseNew Warrants Price (£) ExpiryProposed DirectorsKarl Smithson 54,385 0.251 30 June 2010Luis da Silva 49,059 0.251 30 June 2010Lord Daresbury 1,078,090 0.251 30 June 2010Steven Poulton 94,218 0.251 30 June 2010Angus Ogilvie 25,125 0.251 30 June 2010Paul Rankine — — —James Campbell — — —Existing DirectorsJohn Teeling — — —James Finn — — —Alex van Zyl — — —Paul Nel — — —265

8.6 Other than as set out below, the Company is not aware of any person, other than the ExistingDirectors and Proposed Directors and their immediate families, who as at 26 January 2010 (beingthe latest practicable date prior to publication of this document) and immediately followingAdmission will, directly or indirectly, be interested in 3 per cent. or more of the voting rights of theCompany or who, directly or indirectly, jointly or severally exercise or could exercise control overthe Company, or whose interest is notifiable under the Disclosure Rules or otherwise in the UK:As at of this documentAs at AdmissionNumber of Percentage of Number of Percentage ofExisting Issued Ordinary Consolidated EnlargedOrdinary Shares Share Capital Ordinary Shares Share CapitalAfrican Aura Mining Inc Nil Nil 30,792,770 31.77Altima Global SpecialOpportunities Master Fund Nil Nil 8,128,767 8.39SearchGold Nil Nil 2,685,992 2.77Strand Nominees Limited 10,080,086 11.21 2,016,017 2.08Marlies Smith 8,700,000 9.67 1,740,000 1.80K.B. (C.I.) Nominees Limited 7,200,000 8.00 1,440,000 1.49African Diamonds 5,000,000 5.56 1,000,000 1.03TD Waterhouse Nominees Limited 3,381,845 3.76 676,369 0.70NutraCo Nominees Limited 3,323,428 3.69 664,685 0.698.7 The Company is indirectly controlled by African Aura. However, to ensure that the Companyfunctions independently, it has entered into the Relationship Agreement described in paragraph 17of Part I of this document.8.8 Other than the protections afforded to Shareholders in the Company under the City Code (detailsof which are set out in Part I of this document) and the Relationship Agreement, there are nocontrols in place to ensure that any Shareholder having a controlling interest in the Company doesnot abuse that interest.8.9 Save for the Proposals, neither the Existing Directors, the Proposed Directors nor the Companyare aware of any arrangements in place which may result in a change in control of the Company.8.10 Save as disclosed in this document, none of the Existing Directors or Proposed Directors has anyinterest, beneficial or non-beneficial, in the share or loan capital of the Company.8.11 Save as disclosed in this document, no Existing Director or Proposed Director has any interest,direct or indirect, in any assets which have been or are proposed to be acquired or disposed of by,or leased to, the Group or Enlarged Group and no contract or arrangement exists in which anyExisting Director or Proposed Director is materially interested and which is significant in relationto the business of the Group or Enlarged Group.8.12 There are no outstanding loans granted by the Company to any Existing Director or any ProposedDirector, nor are there any guarantees provided by the Company for their benefit.8.13 No Existing Director, Proposed Director or any member of his family has a related financialproduct referenced to the Ordinary Shares.9. Directors’ Service Contracts and Letters of AppointmentExisting Directors – current arrangements9.1 The Company has entered into a letter of appointment with Alex van Zyl dated 1 December 2006in respect of his directorship of the Company with effect from 1 December 2006. Under the letterof appointment, Mr van Zyl is entitled to a fee of US$1,000 (excluding applicable VAT) per dayfor work undertaken on behalf of the Company and reimbursement of reasonable expenses but noother remuneration. He is required to retire pursuant to the rotation provisions of the Articles. Ifhe is removed from office by a resolution of the shareholders, not re-elected to office or the office266

is vacated in accordance with the letter of appointment he will not be entitled to compensation.Upon termination no benefits (other than those accruing during the notice period) are due to theDirector. The appointment may be terminated by either party with three months’ written notice.9.2 The Company has entered into a letter of appointment with James Campbell dated 1 December2006 in respect of his directorship of the Company with effect from 1 December 2006. Under theletter of appointment, Mr Campbell is entitled to an annual fee of £20,000 (excluding applicableVAT) and reimbursement of reasonable expenses but no other remuneration. He is required toretire pursuant to the rotation provisions of the Articles. If he is removed from office by aresolution of the shareholders, not re-elected to office or the office is vacated in accordance withthe letter of appointment he will not be entitled to compensation. Upon termination no benefits(other than those accruing during the notice period) are due to the Director. The appointment maybe terminated by either party with three months’ written notice. Mr Campbell’s salary wasincreased from £20,000 to £50,000 at a board meeting of the Company held on the30th November 2007.9.3 The Company has entered into a letter of appointment with John Teeling dated 1 December 2006in respect of his directorship of the Company with effect from 1 December 2006. Under the letterof appointment, Mr Teeling is entitled to an annual fee of £40,000 (excluding applicable VAT) andreimbursement of reasonable expenses but no other remuneration. He is required to retirepursuant to the rotation provisions of the Articles. If he is removed from office by a resolution ofthe shareholders, not re-elected to office or the office is vacated in accordance with the letter ofappointment he will not be entitled to compensation. Upon termination no benefits (other thanthose accruing during the notice period) are due to the Director. The appointment may beterminated by either party with three months’ written notice.9.4 The Company has entered into a letter of appointment with James Finn dated 1 December 2006in respect of his directorship of the Company with effect from 1 December 2006. Under the letterof appointment, Mr Finn is entitled to an annual fee of £20,000 (excluding applicable VAT) andreimbursement of reasonable expenses but no other remuneration. He is required to retirepursuant to the rotation provisions of the Articles. If he is removed from office by a resolution ofthe shareholders, not re-elected to office or the office is vacated in accordance with the letter ofappointment he will not be entitled to compensation. Upon termination no benefits (other thanthose accruing during the notice period) are due to the Director. The appointment may beterminated by either party with three months’ written notice.9.5 The Company has not entered into a formal letter of appointment with Paul Nel. The Companyhas agreed that Mr Nel is entitled to US$500 per day and reimbursement of reasonable expensesbut no other remuneration.Proposed Directors – arrangements as from Admission9.6 Karl Smithson has entered into a service agreeent with WAD dated 27 January 2010, conditionalon Admission. This agreement confirms his appointment as Chief Executive Officer.Mr Smithson receives a salary of £135,000 per annum. Mr Smithson is eligible for a listingbonus of £30,000, half of which will be satisfied by the allotment of Ordinary Shares.Mr Smithson is entitled to a death in service benefit of three times his salary, medical expensesinsurance, medical evacuation insurance and travel insurance. Mr Smithson can terminate theagreement by giving the Company 6 months’ notice. The Company can terminate the agreementby giving Mr Smithson 12 months’ notice. The Company is entitled to pay Mr Smithson in lieuof his notice. There are further termination provisions which if triggered, entitle Mr Smithson toreceive two years’ full salary from the Company if he is dismissed or “constructively” dismissed,following a change in control of the Company. The agreement also contains certain restrictionsrelating to confidentiality and competition with the Company. The agreement is governed byEnglish law. Mr Smithson is entitled to 28 days holiday per year plus public holidays.9.7 Angus Ogilvie has entered into a service agreeent with WAD dated 27 January 2010 conditional onAdmission. This agreement confirms his appointment as Company’s Financial Director. Mr Ogilviereceives a salary of £81,000 per annum. Mr Ogilvie is entitled to a listing bonus of £15,000, half of267

which will be satisfied by the allotment of Ordinary Shares. Mr Ogilvie is entitled to a death inservice benefit of three times his salary, medical expenses insurance, medical evacuation insuranceand travel insurance. The agreement can be terminated by either party giving 3 months’ notice. TheCompany is entitled to pay Mr Ogilvie in lieu of his notice.The agreement also contains certainrestrictions relating to confidentiality and competition with the Company. The agreement isgoverned by English law. Mr Ogilvie is entitled to 28 days holiday per year plus public holidays.9.8 Lord Peter Daresbury will be appointed as a non-executive chairman of the Company fromAdmission. Lord Daresbury’s Board fee is £50,000. Lord Daresbury is currently entitled to a£5,000 fee for sitting on the Audit Committee and £4,000 for sitting on the RemunerationCommittee in addition to his fee above. The Letter of Appointment contains certain restrictionsrelating to confidentiality and competition with the Company. The appointment can be terminatedby either party giving the other 3 months’ notice. It is confirmed in the Letter of Appointment thatLord Daresbury is an office holder and not an employee and provided that this is consistent withhow the relationship between Lord Daresbury and the Company works in practice, Lord Daresburyis not entitled to employee’s rights, such as the right to bring a claim for unfair dismissal.9.9 Luis da Silva will be appointed as a non-executive director of the Company from Admission.Mr Da Silva’s Board fee is £16,000. If Mr Da Silva is asked to sit on any committee he will beentitled to a £5,000 fee for sitting on the Audit Committee, and a £4,000 fee for sitting on theRemuneration Committee, in addition to his fee above. The Letter of Appointment containscertain restrictions relating to confidentiality and competition with the Company. Theappointment can be terminated by either party giving the other 3 months’ notice. It is confirmedin the Letter of Appointment that Mr Da Silva is an office holder and not an employee andprovided that this is consistent with how the relationship between Mr Da Silva and the Companyworks in practice, Mr Da Silva’s is not entitled to employee’s rights, such as the right to bring aclaim for unfair dismissal.9.10 Paul Rankine will be appointed as a non-executive director of the Company from Admission.Mr Rankine is also the Company’s Remuneration Committee Chairman. Mr Rankine is not entitledto any remuneration for his position. The Letter of Appointment contains certain restrictionsrelating to confidentiality and competition with the Company. The appointment can be terminatedby either party giving the other 3 months’ notice. It is confirmed in the Letter of Appointment thatMr Rankine is an office holder and not an employee and provided that this is consistent with howthe relationship between Mr Rankine and the Company works in practice, Mr Rankine is notentitled to employee’s rights, such as the right to bring a claim for unfair dismissal.9.11 Steven Poulton will be appointed as a non-executive director of the Company from Admission.Mr Poulton also sits on the Company’s Audit Committee. Mr Poulton’s Board fee is £16,000.Mr Poulton is currently entitled to a £5,000 fee for sitting on the Audit Committee and a £4,000fee for sitting on the Remuneration Committee, in addition to his fee above. The Letter ofAppointment contains certain restrictions relating to confidentiality and competition with theCompany. The appointment can be terminated by either party giving the other 3 months’ notice.It is confirmed in the Letter of Appointment that Mr Poulton is an office holder and not anemployee and provided that this is consistent with how the relationship between Mr Poulton andthe Company works in practice, Mr Poulton is not entitled to employee’s rights, such as the rightto bring a claim for unfair dismissal.9.12 James Campbell will be appointed as a non-executive director of the Company from Admission.Mr Campbell’s Board fee is £16,000. If Mr Campbell is asked to sit on any committee he will beentitled to a £5,000 fee for sitting on the Audit Committee and a £4,000 fee for sitting on theRemuneration Committee, in addition to his fee above. The Letter of Appointment containscertain restrictions relating to confidentiality and competition with the Company. Theappointment can be terminated by either party giving the other 3 months’ notice. It is confirmedin the Letter of Appointment that Mr Campbell is an office holder and not an employee andprovided that this is consistent with how the relationship between Mr Campbell and the Companyworks in practice, Mr Campbell is not entitled to employee’s rights, such as the right to bring aclaim for unfair dismissal.268

Summary of Termination Arrangements with Existing Directors9.13 Alex Van Zyl and James Campbell’s employment as Executive Directors of WAD will terminatewith effect from Admission. Both Mr Van Zyl and Mr Campbell have signed compromiseagreements with the company in which they agree to waive any claims they may have against thecompany arising out of the termination of their employment or other office, in return for a paymentof £1. The agreement also provides for Mr Van Zyl resignation as a stautory director, but sinceMr Campbell has been appointed as a non-executive Director, his compromise agreement makes noprovision for the resignation of his statutory directorship. Any outstanding salary owed to either ofthese Directors prior to the termination of their employment will be satisfied by the allotment tothem of shares in WAD on the day before Admission. Mr Van Zyl will receive 291,675 shares andMr Campbell will receive 177,150 shares. It is also confirmed that any restrictions that werecontained in their former service agreements will remain in force.9.14 Mr Teeling, Mr Finn and Mr Nel’s engagements as Non-Executive Directors of WAD willterminate with effect from Admission. All have signed waivers with the Company in which theyagree to waive any claims they may have against the Company arising out of the termination oftheir engagement, in return for a payment of £1. Any outstanding fees owed to these Directorsprior to the termination of their engagements will be satisfied by the allotment to them of sharesin WAD on the day before Admission. Mr Teeling will receive 874,996 shares and Mr Finn375,000 shares. It is also confirmed that any restrictions that were contained in their former lettersof appointment will remain in force.9.15 Other than as disclosed above, there are no Existing Directors’ or Proposed Directors’ servicecontracts, or contracts in the nature of services, with the Company, other than those which expireor are terminable without payment of compensation on no more than 12 months’ notice.9.16 The aggregate remuneration paid and benefits in kind granted to the Existing Directors in the lastfinancial period ended 30 April 2009 was £130,000 and the aggregate remuneration payable andbenefits in kind to be granted to the Existing Directors and Proposed Directors in the currentfinancial period ending 30 April 2010 under the arrangements in force at the date of thisdocument is estimated to be £182,117.10. Accounting10.1 The Company’s accounting reference date is 30 April in each year. The Company’s nextaccounting reference period will end on 30 April 2010.11. Taxation11.1 UK Tax General11.1.1 The following information is given in summary form only and is based on tax legislationas it exists at the present time. The information relates to the tax position of holders ofOrdinary Shares in the capital of the Company who are resident or ordinarily resident inthe United Kingdom for tax purposes. The statements below do not constitute advice toany Shareholder on his or her personal tax position, and may not apply to certain classesof investor (such as persons carrying on a trade in the United Kingdom orUnited Kingdom insurance companies).11.1.2 This is only a summary of the tax reliefs available to investors and should not beconstrued as constituting advice. A potential investor should obtain advice from his orher own investment or taxation adviser before subscribing for Ordinary Shares.11.2 Inheritance Tax Relief11.2.1 The company’s shares are treated as unquoted shares for UK inheritance tax (IHT)purposes subject to certain conditions for non-trading activities. Individuals and Trusteessubject to IHT may be entitled to business property relief of up to 100 per cent. after aholding period of two years, providing all the relevant conditions for the relief aresatisfied at the appropriate time.269

11.3 Income Tax11.3.1 Under current United Kingdom taxation legislation, no withholding tax will be deductedfrom dividends paid by the Company.11.3.2 Dividends paid by the Company will carry an associated tax credit of one-ninth of thecash dividend or ten per cent. of the aggregate of the cash dividend and associated taxcredit. Individual shareholders resident in the UK receiving such dividends will be liableto income tax on the aggregate of the dividend and associated tax credit at the dividendbasic rate (10 per cent.) or the dividend higher rate (32.5 per cent.).11.3.3 The effect will be that the taxpayers who are otherwise liable to pay at only the lower rateor basic rate of income tax will have no further liability or income tax in respect of sucha dividend. Higher rate payers will have an additional liability (after taking into accountthe tax credit) of 22.5 per cent. of the aggregate of the cash dividend and the associatedtax credit, or an effective rate of 25 per cent. of the dividend actually received. Individualshareholders whose income tax liability is less than the tax credit will not be entitled toclaim a repayment of all or part of the tax credit associated with such individuals.11.3.4 From 6 April 2010, a new rate of tax has been introduced for individuals with taxableincome in excess of £150,000. For those individuals who suffer tax at the new higherrate, the dividend will be subject to tax at 42.5 per cent. less any deemed tax credit (aneffective tax rate of 36.1 per cent. of the dividend received).11.3.5 With certain exceptions, a holder of Ordinary Shares that is a company resident (fortaxation purposes) in the United Kingdom and receives a dividend paid by the Company,will not be subject to tax in respect of the dividend.11.4 Taxation of capital gains made by shareholders11.4.1 A UK resident individual shareholder who disposes of, or who is deemed to dispose of,their shares in the Company may be liable to capital gains tax in relation thereto at a flatrate of 18 per cent. of any gain thereby realised. The rate of tax may be reduced to aneffective tax rate of 10 per cent. if the conditions for entrepreneurs’ relief are met. Incomputing the gain, the shareholder should be entitled to deduct from proceeds the costto him of the shares (together with incidental costs of acquisition and disposal).11.4.2 A UK resident corporate shareholder disposing of its shares in the company may beliable to corporation tax on chargeable gains in relation thereto at the usual rates ofcorporation tax applicable to it (currently 21-28 per cent. depending on the taxableprofits of the shareholder,). In computing the chargeable gain liable to corporation tax,the shareholder is entitled to deduct from the disposal proceeds, the cost to it of theshares, together with incidental costs of acquisition, as increased by indexationallowance, and disposal costs.11.4.3 In some circumstances, a shareholder may be exempt from corporation tax in relation to itsdisposal of shares under the substantial shareholding exemption or be able to reduce thequantum of the gain by capital and/or income losses arising to the corporate shareholder.11.5 Stamp Duty and Stamp Duty Reserve Tax11.5.1 No United Kingdom stamp duty will be payable on the issue by the Company ofOrdinary Shares. Transfers of Ordinary Shares for value will give rise to a liability to payUnited Kingdom ad valorem stamp duty, or stamp duty reserve tax, at the rate in eachcase of 50p per £100 of the amount or value of the consideration (rounded up in the caseof stamp duty to the nearest £5). Transfers under the CREST system for paperlesstransfers of shares will generally be liable to stamp duty reserve tax.Any person who is in any doubt as to his or her tax position or who may be subject to tax in anyjurisdiction other than the United Kingdom should consult his or her own professional adviser.270

11.6 Irish Taxation – General11.6.1 The statements set out below are general in nature and are intended only as a generalguide to certain aspects of current Irish law and practice and apply only to certaincategories of persons. The statements set out below summarise the Irish tax position ofshareholders who are resident or ordinarily resident in Ireland. The summary does notpurport to be a complete analysis of all the potential tax consequences of acquiring,holding and disposing of Ordinary Shares and only relates to the position of shareholderswho are the beneficial owners of their Ordinary Shares and who hold their OrdinaryShares as investments; in particular it does not address the position of certain classes ofshareholders, such as dealers in securities.11.6.2 Prospective purchasers of Ordinary Shares who are in any doubt about their tax position,and in particular those who are subject to taxation in any jurisdiction other than theRepublic of Ireland are strongly recommended to consult their own tax advisers concerningthe tax consequences of the acquisition, ownership and disposal of Ordinary Shares.11.6.3 This summary is based upon Irish law and practice as of the date of this document. Irishlaw and practice may be subject to change. Any investor who is in any doubt as to his orher tax position, or who may be subject to tax in any other jurisdiction, should consulthis or her professional adviser.11.7 Taxation of dividends11.7.1 Irish resident Shareholders who are individuals are subject to Irish income tax on theactual amount of dividend received. Dividends will be chargeable to Irish income tax ata rate of either 20 per cent. or 41 per cent., depending on the particular circumstances ofthe individual. It should be noted that the dividend income may also be assessed to PRSI(Pay Related Social Insurance) depending on the Insurance class. The dividend receivedmay be subject to Health Contribution Levies and the Income Levy, depending upon thelevel of income of the individual.11.7.2 An Irish resident Shareholder which is a company will be subject to Irish corporation taxon dividends received from the Company and tax will not be withheld at source. Creditfor underlying UK tax paid may be available depending on the percentage shareholdingheld by such company.11.8 Capital Gains Tax11.8.1 The Company’s Ordinary Shares constitute chargeable assets for Irish capital gains taxpurposes and, accordingly, shareholders who are resident or ordinarily resident in Ireland,depending on their circumstances, may be liable to Irish tax on capital gains on a disposalof Ordinary Shares.11.8.2 An Irish resident shareholder which is a company may be exempt from Irish capital gainstax on the sale of shares in the Company, provided the requirements of the substantialshareholding exemption are satisfied.11.9 Stamp duty11.9.1 Transfers of shares in the Company are exempt from Irish stamp duty on the basis thatthe transfer does not relate to:11.9.1.1 any stocks or marketable securities (which includes shares) which areregistered in Ireland; or11.9.1.2 any immovable property situated in Ireland or any right over or interest in suchproperty11.9.2 Normally, the transfer of shares in the Company will only be subject to Stamp Duty inthe situation where shares registered in Ireland or immovable property situated in Irelandform part of the consideration for the shares in the Company.271

11.10 Capital Acquisitions Tax11.10.1 A charge to Irish Capital Acquisitions Tax will arise where:11.10.1.1 the beneficiary is resident or ordinarily resident in Ireland at the date of thegift/inheritance; or11.10.1.2 the disponer is resident or ordinarily resident in Ireland at the date of thegift/inheritance; or11.10.1.3 the property in the gift/inheritance is situated in Ireland.11.10.2 Therefore, the gift/inheritance of shares in the Company by an Irish resident shareholderwill trigger a charge to Irish Capital Acquisitions Tax.12. Memorandum12.1 Pursuant to the (including its objects) 2006 Act, from 1 October 2009 all items listed in theCompany’s memorandum of association were deemed to form part of the Company’s ExistingArticles of Association with the exception of the names of the initial subscribers to the Company.13. Existing ArticlesThe Existing Articles of Association contain, inter alia, provisions to the following effect:13.1 Voting RightsSubject to the Companies Act 1985 and any special rights or restrictions as to voting attached toany shares by or to any suspension or abrogation of voting rights in accordance with the articlesof association, on a show of hands every member who is present in person shall have one voteand, on a poll, every member who is present in person or by proxy shall have one vote for everyshare of which he is the holder. No major shareholders have different voting rights.13.2 Transfer of Shares13.2.1 The shares are in registered form but, notwithstanding any other provision of the articles ofassociation, a member is entitled to transfer his shares and other securities by means of arelevant system as referred to in the CREST Regulations including the relevant system ofwhich CRESTCo is the operator. Any provision of the articles of association which isinconsistent with the holding of shares in uncertificated form, the transfer of title to sharesby means of such a relevant system or the CREST Regulations shall, to that extent, not apply.13.2.2 Any member may, subject to the articles of association, transfer all or any of his sharesby an instrument of transfer in writing in any usual form or in any other form approvedby the board. The instrument of transfer of a share shall be signed by or on behalf of thetransferor (and, in the case of a share which is not fully paid, by or on behalf of thetransferee) and the transferor shall be deemed to remain the holder of the share until thename of the transferee is entered in the register in respect thereof.13.2.3 The directors may in their absolute discretion and without giving any reason, refuse toregister any transfer of a share (or renunciation or renounceable letter of allotment) unless:13.2.3.1 the instrument of transfer is lodged with the registered office of the Companyor such other place as the directors may appoint accompanied by the relevantcertificate and such other evidence as the directors may reasonably require toshow the right of the transferor to make the transfer;13.2.3.2 the instrument of transfer is duly stamped;13.2.3.3 the instrument of transfer is in respect of only one class of share;13.2.3.4 the instrument of transfer is in favour of not more than four transferees; and13.2.3.5 the instrument of transfer is in respect of a share in respect of which all sumspresently payable to the Company have been paid.272

13.3 Pre-emptionSubject to the provisions of the Companies Act 1985 and the articles of association, all theauthorised but unissued shares in the capital of the Company are at the disposal of the directors.The statutory pre-emption rights in relation to the allotment of equity securities (within themeaning of section 94 of the Companies Act, 1985) have been disapplied by a shareholderresolution dated 24 August 2006.13.4 Dividends13.4.1 Subject to the Companies Act, 1985, the Company in general meeting may declaredividends, but no dividend shall exceed the amount recommended by the directors. Exceptin so far as the rights attaching to, or the terms of, any share otherwise provides, alldividends shall be declared and paid according to the amounts paid up on the shares, (butno amount paid up on a share in advance of calls shall be treated for this purpose as paidup on such share). All dividends shall be apportioned and paid pro rata according to theamounts paid up on the shares during any portion or portions of the period in respect ofwhich the dividend is paid except that if any share is issued on terms providing that it shallcarry any particular rights as to dividend such share shall rank for dividend accordingly.13.4.2 The directors may deduct from any dividends or other moneys payable to any member ofor in respect of a share all sums of money (if any) presently payable by him to theCompany on account of calls or otherwise in relation to shares of the Company.13.4.3 Subject to the provisions of the Companies Act, 1985, the directors may pay such interimdividends as appears to the directors to be justified by the profits of the Company andare permitted by the Companies Act, 1985.13.4.4 Any dividend which has remained unclaimed for a period of twelve years from the date ofdeclaration thereof shall at the expiration of that period be forfeited and cease to remainowing by the Company and shall henceforth belong to the Company absolutely.13.5 Variation of RightsSubject to the Companies Act, 1985, if at any time the capital of the Company is divided intodifferent classes of shares, the rights attached to any class of shares may be varied or abrogated,whether or not the Company is being wound up, either (a) in such manner (if any) as may beprovided by such rights or (b) in the absence of any such provision with the consent in writing ofthe holders of three-quarters in nominal value of the issued shares of that class, or with thesanction of an extraordinary resolution passed at a separate general meeting of the holders of theclass, but not otherwise. To every such separate meeting all the provisions of the articles ofassociation relating to general meetings of the Company or to the proceedings thereat shall, so faras applicable and with the necessary modifications apply, except that the necessary quorum shallbe persons holding or representing by proxy at least one-third in nominal value of the issuedshares of the relevant class and at an adjourned meeting one person holding shares of the class inquestion or his proxy and that any holder of shares of the class in question present in person orby proxy may demand a poll. The rights conferred upon the holders of any class of shares issuedwith preferred or other special rights shall not, unless otherwise expressly provided by the articlesof association or by the conditions of issue or of rights attaching to such shares, be deemed to bevaried by the creation or issue of further shares ranking in some or all respects pari passutherewith or subsequent to those already issued or by the reduction of the capital paid up on suchshares or by the purchase or redemption by the Company of its own shares.13.6 Alteration of Share Capital13.6.1 The Company may by ordinary resolution:13.6.1.1 consolidate and divide all or any of its share capital into shares of largeramounts than its existing shares;273

13.6.1.2 sub-divide its shares or any of them into shares of smaller amount than is fixedby the memorandum of association (subject to provisions of the CompaniesAct, 1985) and so that the resolution whereby any share is sub-divided maydetermine that, as regards each share so sub-divided, one or more of the sharesresulting from such sub-division may have any such preferred or other specialrights over or may have such deferred rights or be subject to any restrictions ascompared with the other or others as the Company has power to attach tounissued or new shares; and13.6.1.3 cancel any shares which, at the date of the passing of the resolution, have notbeen taken, or agreed to be taken, by any person and diminish the amount ofshare capital by the amount of the shares so cancelled;13.6.2 subject to the Companies Act, 1985 and any special rights for the time being attached toany shares, the Company may by special resolution reduce its share capital, any capitalredemption reserve and any share premium account in any manner subject to the provisionsof the Companies Act, 1985 and to any rights for the time being attached to any shares;13.6.3 subject to the provisions of the Companies Act, 1985 and to any relevant authority of theCompany in general meeting required by the Companies Act, 1985, all unissued shares(whether forming part of the original or any increased capital) of the Company shall beat the disposal of the board who may allot, (with or without conferring rights ofrenunciation), grant options over or warrants in respect of, offer or otherwise deal withor dispose of them or grant rights to subscribe for or convert any securities into shares,to such persons, at such times and generally on such terms and conditions as they maydetermine, provided that no share shall be issued at a discount;13.6.4 subject to the provisions of the Companies Act, 1985 and to any special rights attachingto any shares, the Company may issue shares which are to be redeemed or are liable tobe redeemed at the option of the Company or the shareholders; and13.6.5 subject to the provisions of the Companies Act, 1985 and to any special rights attachingto any shares, the Company shall have power to purchase its own shares including anyredeemable shares. Any shares to be so purchased may be selected in anymanner whatsoever.13.7 Directors13.7.1 Unless and until the Company in general meeting shall otherwise determine, the numberof directors shall not be less than two but no more than eight in number and the Companymay by ordinary resolution from time to time vary (subject to the Companies Act, 1985)the minimum number and may also fix and from time to time vary a maximum numberof directors.13.7.2 The quorum necessary for the transaction of the business of the directors may be fixedby the directors and, unless so fixed at any other number, shall be two.13.7.3 Subject to the Companies Act, 1985 and provided that he declares the nature of hisinterest at a meeting of the directors, a director, notwithstanding his office:13.7.3.1 may enter into or otherwise be interested in any contract, arrangement,transaction or proposal with the Company or in which the Company isotherwise interested;13.7.3.2 may hold any other office or place of profit under the Company (except that ofauditor or of auditor of a subsidiary of the Company) in conjunction with theoffice of director and may act by himself or through his firm in a professionalcapacity for the Company, and in any such case on such terms as toremuneration and otherwise as the board may arrange, either in addition to orin lieu of any remuneration provided for by any other article;274

13.7.3.3 may be a director or other officer of, or employed by, or a party to anytransaction or arrangement with or otherwise interested in, any companypromoted by the Company or in which the Company is otherwise interested oras regards which the Company has any powers of appointment; and13.7.3.4 shall not be liable to account to the Company for any profit, remuneration orother benefit realised by any such office, employment, contract, arrangement,transaction or proposal; and no such contract, arrangement, transaction orproposal shall be avoided on the grounds of any such interest or benefit.13.8 Proceedings of Directors13.8.1 Subject to the provisions of the articles of association, the directors may meet together forthe dispatch of business, adjourn and otherwise regulate their meetings as they think fit.Questions arising at any meeting shall be determined by a majority of votes. In case of anequality of votes the chairman of the meeting shall have a second or casting vote. Adirector who is also an alternate director shall be entitled in the absence of his appointorto a separate vote on behalf of the director he is representing in addition to his own vote.13.8.2 A director may, and the secretary on the requisition of a director shall, at any timesummon a meeting of the directors. Notice of a board meeting shall be deemed to beproperly given to a director if it is given to him personally or by word of mouth or sentin writing to him at his last known address or any other address given by him to theCompany for that purpose or by electronic communication to any address given by himto the Company for that purpose.13.8.3 A director may waive the requirement that notice be given to him of any board meeting,either prospectively or retrospectively. It shall not be necessary to give notice of a boardmeeting to a director who is absent from the United Kingdom unless he has requestedthe board in writing that notices of board meetings shall during his absence be given tohim at any address in the United Kingdom notified to the Company for this purpose orany address for the receipt of electronic communications notified by him to the Companyfor this purpose, but such notices need not be given any earlier than notices given todirectors not so absent.13.9 Restrictions on Voting by Directors13.9.1 Save as provided by the articles of association, a director shall not vote on (nor be countedin the quorum) in relation to any resolution of the board (or committee of the board)concerning any contract, arrangement, transaction or any other proposal whatsoever towhich the Company is or is to be a party and in which he has an interest which (togetherwith any interest of any person connected with him within the meaning of section 346 ofthe Companies Act, 1985) is, to his knowledge, a material interest otherwise than by virtueof his interests in shares or debentures or other securities of or otherwise in or through theCompany, unless the resolution concerns any of the following matters:13.9.1.1 the giving of any security, guarantee or indemnity to him in respect of moneylent or obligations incurred by him at the request of or for the benefit of theCompany or any of its subsidiaries;13.9.1.2 the giving of any security, guarantee or indemnity to a third party in respect ofa debt or obligation of the Company or any of its subsidiaries for which hehimself has assumed responsibility in whole or in part by the giving of securityor under a guarantee or indemnity;13.9.1.3 any proposal concerning an offer for subscription or purchase of shares ordebentures or other securities or rights of or by the Company or any of itssubsidiaries or of any other company which the Company may promote or inwhich it may be interested in which offer he is or is to be interested as aparticipant in the underwriting or sub-underwriting thereof;275

13.9.1.4 any proposal concerning any other company in which he is interested, directlyor indirectly, and whether in any one or more of the capacities of officer,creditor, employee or holder of shares, debentures, securities or rights of thatother company, but where he is not the holder (otherwise than as nominee forthe Company or any of its subsidiaries) of or beneficially interested inone per cent. or more of the issued shares of any class of such company or ofany third company through which his interest is derived or of the voting rightsavailable to members of the relevant company (any such interest being deemedfor the purpose of this article to be a material interest in all circumstances);13.9.1.5 any proposal concerning the adoption, modification or operation of asuperannuation fund, retirement benefits scheme, share option scheme or shareincentive scheme under which he may benefit; or13.9.1.6 any proposal concerning the purchase and/or maintenance of any insurancepolicy under which he may benefit.13.10 Remuneration of Directors13.10.1 The directors (other than alternate directors) shall be entitled to receive by way of fees fortheir services such sums as the board may from time to time determine not exceeding inaggregate £500,000 per annum or such higher sum as may from time to time be determinedby an ordinary resolution of the Company. Any fees payable pursuant to this Article shallbe distinct from any salary, remuneration or other amounts payable to a director pursuantto other provisions of these articles of association and shall accrue from day to day.13.10.2 The directors shall also be entitled to be paid all travelling, hotel and other expensesproperly incurred by them in connection with the business of the Company, or inattending and returning from meetings of the directors or of committees of the directorsor general meetings or separate meetings of the holders of any class of shares or ofdebentures of the Company or otherwise in connection with the discharge of their duties.13.10.3 The salary or remuneration of any director appointed to hold any employment or executiveoffice in accordance with the provisions of these articles of association may be either afixed sum of money, or may altogether or in part be governed by business done or profitsmade or otherwise determined by the board, and may be in addition to or in lieu of any feepayable to him for his services as director pursuant to these articles of association.13.10.4 The directors may establish, maintain participate in or contribute to or procure theestablishment and maintenance of, participation in or contribution to any pension,annuities, superannuation, benevolent or life assurance fund, scheme or arrangement(whether contributory or otherwise) for the benefit of, and give or procure the giving ofdonations, gratuities, pensions and allowances, benefits and emoluments to any personswho are or were at any time in the employment or service of the Company.13.11 Appointment and Removal of Directors13.11.1 The directors may from time to time appoint any one or more of their body to be holderof any executive office for such period and on such terms and with or without such titleor titles (including but not limited to chairman, deputy chairman, vice chairman,managing director, chief executive and joint, deputy or assistant managing director orchief executive) as they think fit. A director holding any such office (whether appointedas aforesaid or otherwise) shall, whilst holding such office, be subject to retirement byrotation, shall be taken into account in determining the retirement by rotation ofdirectors, and shall (subject to the terms of any contract between him and the Company)be subject to the same provisions as to resignation and removal as the other directors ofthe Company and if he shall vacate the office of director or (subject as aforesaid) if thedirectors resolve that his term of office as holder of such executive office as aforesaid bedetermined, his appointment as, such shall ipso facto determine. The office of chairmanshall not be subject to retirement by rotation.276

13.11.2 A director may be requested to resign by notice in writing addressed to him at his addressshown in the register of directors and signed by not less than three-quarters of the otherdirectors (without prejudice to any claim for damages which he may have for breach ofany contract between him and the Company.13.11.3 The directors shall have power at any time, and from time to time, to appoint any personwho is willing to act to be a director, either to fill a vacancy or as an additional director,but so that the total number of directors shall not at any time exceed the maximumnumber (if any) fixed by or in accordance with these articles of association. Subject tothe provisions of the Companies Act, 1985 and of these articles of association, anydirector so appointed shall hold office only until the conclusion of the next followingannual general meeting, and shall be eligible for reappointment at that meeting. Anydirector who retires under this Article shall not be taken into account in determining thedirectors who are to retire by rotation at such meeting and if not reappointed at suchannual general meeting, he shall vacate office at the conclusion thereof.13.11.4 A director shall not be required to hold any shares of the Company.13.12 Retirement of DirectorsThe provisions of section 293 of the Companies Act, 1985 relating to the mandatory retirementof directors at age 70 have been disapplied by the Company.13.13 Annual and Extraordinary General Meetings13.13.1 The Company shall in each year hold a general meeting as its annual general meeting inaddition to any other meeting(s) in that year and not more than fifteen months shallelapse between the date of one annual general meeting of the Company and that of thenext. Subject to the provisions of the Companies Act, 1985, the annual general meetingshall be held at such time and place as the directors may determine. All general meetingsother than annual general meetings shall be called extraordinary general meetings.13.13.2 The board may convene an extraordinary general meeting whenever it thinks fit. Anextraordinary general meeting shall also be convened on such requisition, or in defaultmay be convened by such requisitionists, as provided by section 368 of the CompaniesAct, 1985. At any meeting convened on such requisition or by such requisitionists nobusiness shall be transacted except that stated by the requisition or proposed by theboard. If there are not within the United Kingdom sufficient members of the board toconvene a general meeting, any director may call a general meeting.13.13.3 Subject to the provisions of the Companies Act, 1985, an annual general meeting and ageneral meeting for the passing of a special resolution shall be called by at least 21 cleardays’ notice and all other general meetings shall be called by at least 14 clear days’ notice.13.13.4 Shorter notice than that specified above may be deemed to have been given in the caseof an annual general meeting by all the members entitled to attend and vote at themeeting; and in the case of any other meeting, by a majority number of the membershaving a right to attend and vote at the meeting, being a majority together holding notless than 95 per cent. in nominal value of the shares giving that right.13.13.5 No business shall be transacted at any annual general meeting or extraordinary generalmeeting unless a quorum is present when the meeting proceeds to business. Save asotherwise provided in the articles of association, two persons present in person or byproxy and entitled to vote at the meeting shall be a quorum for all purposes.13.14 Borrowing PowersThe directors may exercise all the powers of the Company to borrow money and to mortgage orcharge its undertaking, property, assets and uncalled capital and (subject to the Companies Act,1985) to issue debentures and other securities, whether outright or as collateral security for anydebt, liability or obligation of the Company or of any third party.277

13.15 Untraced ShareholdersThe Company shall be entitled to sell at the best price reasonably obtainable any share held by amember, or any share to which a person is entitled by transmission, if all of the followingstipulations are complied with in relation thereto:13.15.1 for a period of 12 years no cheque or warrant sent by the Company through the post in aprepaid letter addressed to the member or to the person entitled by transmission to theshare, at his registered address or at the last known address given by the member or theperson entitled by transmission as the address to which the cheques and warrants are tobe sent, has been cashed and no communication has been received by the Company fromthe member or person concerned:13.15.2 the Company has at the expiration of the said period of 12 years, by advertisement inboth a national daily newspaper and in a newspaper circulating in the area in which theaddress referred to in sub-paragraph (13.15.1) is located, and by notice in writing to theLondon Stock Exchange if shares of the class concerned are listed on that exchange orany secondary market of that exchange, giving notice of its intention to sell such share;13.15.3 the Company has not during the further period of three months after the date of theadvertisement and prior to the sale of the share received any communication from themember or person entitled by transmission; and13.15.4 for the purpose of giving effect to any such sale the Company may appoint any person toexecute as transferor an instrument of transfer of such share, and such instrument shallbe as effective as if it had been executed by the holder of, or person entitled bytransmission to, such share. The Company shall be liable to account without interest tothe member or other person entitled to such share for the net proceeds of such sale andshall be deemed to be his debtor and not a trustee for him in respect of the same.13.16 Winding UpIf the Company shall be wound up (whether the liquidation is voluntary, under supervision or bythe court) the liquidator may, with the authority of an extraordinary resolution and any othersanction required by the Companies Act, 1985, divide among the members in specie the whole orany part of the assets of the Company and whether or not the assets shall consist of property ofone kind or shall consist of properties of different kinds, and may for such purposes set such valueas he deems fair upon any one or more or classes of property. He may determine how suchdivision shall be carried out as between the members or different classes of members.13.17 Disclosure of InterestsIf a member, or any person appearing to be interested in any shares held by a member, has been dulyserved with a notice given under section 212 of the Companies Act, 1985 (the “Notice”) and is indefault, for a relevant period from such service, in supplying to the Company the information therebyrequired then, and unless the directors otherwise determine, the member shall not be entitled inrespect of any shares held by him to vote at general meeting, either personally or by proxy, or toexercise any other right conferred by membership in relation to meetings of the Company.Where a member has a holding of at least 0.25 per cent. of any class of shares then, in additionto the restriction above and unless the directors otherwise determine, the member shall not beentitled in respect of any shares held by him to:13.17.1 receive any dividend payable in respect of such shares; or13.17.2 transfer or agree to transfer any of such shares or any rights therein.278

The restrictions in the articles of association are without prejudice to the right of either themember holding the shares concerned or, if different, the beneficial owner of those shares toeffect or agree to sell under an arm’s length transfer of those shares. For the purpose of theArticles, an arm’s length transfer in relation to any shares is a transfer pursuant to:13.17.3 a sale of those shares on a recognised investment exchange (as defined in FSMA) andthe AIM Market of the London Stock Exchange plc or any other stock exchange outsidethe United Kingdom on which the shares are normally traded; or13.17.4 a takeover offer for the Company (as defined in section 14 of the Company Securities(Insider Dealing Act 1985) which relates to those shares.The relevant period referred to above means 14 days from the date of service of the Notice wherethe shares represent at least 0.25 per cent. of any class of shares and 28 days in all other cases.13.18 GeneralSave as disclosed, neither the memorandum of association of the Company nor the articles ofassociation:13.18.1 contain any provision that would have the effect of delaying, deferring or preventing achange of control of the Company; or13.18.2 contain any provision governing the ownership threshold above which shareholderownership must be disclosed; or13.18.3 impose any condition governing changes in the capital that is more stringent than isrequired by law.14 Mandatory Bids, Squeeze-Out and Sell-Out Rules relating to the Ordinary Shares14.1 Mandatory BidThe City Code will apply to the Company from Admission. Under the City Code, where:14.1.1 any person acquires, whether by a series of transactions over a period of time or not, aninterest in shares which (taken together with shares in which he is already interested, andin which persons acting in concert with him are interested) carry 30 per cent. or more ofthe voting rights of a company; or14.1.2 any person who, together with persons acting in concert with him, is interested in shareswhich in the aggregate carry not less than 30 per cent. of the voting rights of a companybut does not hold shares carrying more than 50 per cent. of such voting rights and suchperson, or any person acting in concert with him, acquires an interest in any other shareswhich increases the percentage of shares carrying voting rights in which he is interested;such person shall, except in limited circumstances, be obliged to extend offers, on thebasis set out in Rules 9.3, 9.4 and 9.5 of the City Code, to the holders of any class of equityshare capital whether voting or non-voting and also to the holders of any other class oftransferable securities carrying voting rights. Offers for different classes of equity sharecapital must be comparable; the Panel should be consulted in advance in such cases.14.2 Squeeze-outUnder sections 979 to 982 of the 2006 Act, if an offeror were to acquire 90 per cent. of theOrdinary Shares it could then compulsorily acquire the remaining 10 per cent. It would do so bysending a notice to outstanding Shareholders telling them that it will compulsorily acquire theirshares, provided that no such notice may be served after the end of (a) the period of three monthsbeginning with the day after the last day on which the offer can be accepted, or (b) if earlier, andthe offer is not one to which section 943(1) of the 2006 Act applies, the period of six monthsbeginning with the date of the offer.279

Six weeks following service of the notice, the offeror must send a copy of it to the Companytogether with the consideration for the Ordinary Shares to which the notice relates, and aninstrument of transfer executed on behalf of the outstanding Shareholder(s) by a person appointedby the offeror.The Company will hold the consideration on trust for the outstanding Shareholders.14.3 Sell-outSections 983 to 985 of the 2006 Act also give minority Shareholders in the Company a right tobe bought out in certain circumstances by an offeror who had made a takeover offer. If a takeoveroffer related to all the Ordinary Shares and at any time before the end of the period within whichthe offer could be accepted the offeror held or had agreed to acquire not less than 90 per cent. ofthe Ordinary Shares, any holder of shares to which the offer related who had not accepted theoffer could by a written communication to the offeror require it to acquire those shares. Theofferor is required to give any Shareholder notice of his right to be bought out within one monthof that right arising. The offeror may impose a time limit on the rights of minority Shareholdersto be bought out, but that period cannot end less than three months after the end of the acceptanceperiod, or, if longer a period of three months from the date of the notice.If a Shareholder exercises his/her rights, the offeror is bound to acquire those shares on the termsof the offer or on such other terms as may be agreed.There have been no takeover bids by third parties in respect of the Company’s equity, which haveoccurred during the last financial year or the current financial year.15 Material Contracts15.1 Other than as set out above in paragraph 9 of this Part X or as otherwise described in thesummaries of the Enlarged Group’s mineral rights and licences as set out in Part I and III, thereare no contracts (not being in the ordinary course of business) entered into by the Group or theEnlarged Group in the two years immediately preceding the date of this document which are ormay be material or which contain any provision under which the Enlarged Group has anyobligation or entitlement which is material to it as at the date of this document.15.2 Acquisition AgreementDetails of the Acquisition Agreement are set out at paragraph 8 of Part I, as are details of thearrangements in relation to Stellar share options, Stellar Warrants and New Warrants and theStellar Convertible Debt.15.3 Nominated Adviser and Broker AgreementThe Company has entered into a nominated adviser and broker agreement dated 27 January 2010with RBC, the Existing Directors and the Proposed Directors, pursuant to which the Companyhas appointed RBC to act as nominated adviser and broker to the Company for the purposes ofthe AIM Rules and for the purpose of making the application for Admission, with effect fromthe date of the agreement, each such appointment to continue until terminated by either theCompany or RBC giving not less than one month’s prior written notice any time followingAdmission (or in certain circumstances forthwith by either RBC or the Company). Under theagreement, the Company has agreed to pay to RBC a fee of £65,000 per annum (plus VAT andexpenses) in two equal instalments half-yearly in advance on 1 January and 1 July in each year.The agreement contains ongoing obligations on the Company and the New Board (for so long asthey may remain directors of the Company) in relation to RBC’s appointments as the Company’snominated adviser and broker and indemnities customary of a nominated adviser and brokeragreement from the Company in favour of RBC.15.5 Nominated Adviser Agreement – AstaireThe Company has entered into a nominated adviser agreement dated 28 December 2006 betweenthe Company, its directors and Corporate Synergy plc (now called Astaire Securities plc(“Astaire”) pursuant to which the Company appointed Astaire to act as nominated adviser to the280

Company for the purposes of the AIM Rules for an initial period of twelve months from the dateof the agreement. The agreement has continued in effect following the initial term. The agreementcan be terminated by either party giving to the other not less than three months’ prior writtennotice. The agreement contains indemnities customary of a nominated adviser agreement givenby the Company to Astaire. The Company has agreed to pay to Astaire an initial fee of £20,000per annum together with applicable VAT and to review the fee annually thereafter. In addition tothis fee, the Company has agreed to pay Astaire’s out of pocket expenses reasonably and properlyincurred in connection with its appointment as nominated adviser (together with applicable VAT).WAD has given notice to Astaire of its intention to terminate this agreement from the date ofthis document.The Company however has entered into a joint broker agreement conditional upon Admission withAstaire (the “Joint Broker Agreement”), and under the agreement the Company will pay Astaire abroker fee of £20,000 for the first year from the date of Admission. The Joint Broker Agreementcan be terminated on three months’ notice by either party, such notice not to take effect prior totwelve months from the date of the agreement.15.6 Placing Agreement15.6.1 Pursuant to the Placing Agreement dated 27 January 2010 entered into betweenRBC (1) the Company (2) the Existing Directors (3) the Proposed Directors (4), Stellar(5) and Astaire (6), RBC and Astaire have each agreed to use their respective reasonableendeavours to procure subscribers for the Placing Shares, in each case at the PlacingPrice. The Placing is not underwritten.15.6.2 The Placing Agreement is conditional, inter alia, on the passing of the Resolutions at theGM, the Acquisition Agreement remaining in full force and effect and becomingunconditional (save in respect of any condition relating to the Placing Agreementbecoming unconditional or Admission) and it being completed in all respects inaccordance with its terms and not having been terminated, and Admission taking placeon or before 22 February 2010 (or such later date, not being later than 31 March 2010,as RBC and the Company may agree).15.6.3 The Placing Agreement provides, inter alia, for the payment of a corporate finance fee of£150,000 (plus VAT) to RBC conditional on Admission or where the Placing Agreementlapses or is terminated due to certain acts or omissions of the Company or any of theExisting Directors or Proposed Directors causing the Placing Agreement to so lapse or asa result of which RBC terminates the Placing Agreement. In addition, the Company hasagreed to pay to each of RBC and Astaire for its services under the Placing Agreement acommission of 5 per cent. on the value at the Placing Price of the Placing Shares subscribedby placees (other than placees which are known to and procured by the Company and/orthe Existing Directors and/or the Proposed Directors or placees on Chairman’s List) and acommission to RBC of 1 1 /2 per cent. of the aggregate value at the Placing Price of thePlacing Shares subscribed by placees which are known to and procured by the Companyand/or the Existing Directors and/or the Proposed Directors . RBC and Astaire will pay anycommissions due to any sub-placing agent(s) engaged by RBC and Astaire out ofsuch commissions.15.6.4 In addition and as further consideration for its services under the Placing Agreement, theCompany has agreed to grant to RBC a warrant to subscribe for 1,250,000 OrdinaryShares at the Placing Price exercisable by RBC at any time in the 2 year period followingAdmission, pursuant to the Warrant Agreement referred to at paragraph 15.7 below ofthis Part X of this document.15.6.5 The Placing Agreement contains warranties as to the accuracy of, inter alia, the informationcontained in this document and the application for Admission, as well as the working capitalposition of the Enlarged Group, given by the Company and all the Existing Directors infavour of RBC and Astaire, warranties relating to the Group and its activities given by theCompany and the Existing Directors in favour of RBC and Astaire and warranties relating281

to the Stellar Group and its activities given by the Proposed Directors in favour of RBC andAstaire. The liability of the Company in respect of any breaches of the warranties given byit is unlimited in amount and time. The liability of the Existing Directors and the ProposedDirectors in respect of any breaches of the warranties given by them is limited in the case ofany of the directors who have executive functions to an amount equal to a multiple of 3 timestheir annual remuneration and in the case of any of the directors (except for Paul Rankine)who have non-executive functions to an amount equal to a multiple of 2 times their annualfees. Mr. Rankine’s liability is limited to £10,000. As he is not entitled to any remunerationfor his position as non-executive director his liability is not linked to an annual fee. Anyclaim by RBC or Astaire against the Existing Directors and/or the Proposed Directors for abreach of warranty under the Placing Agreement must also be made prior to the date being3 months following the publication of the audited consolidated financial statements of theCompany for the year ending 30 April 2011.15.6.6 In addition, the Company has agreed to indemnify each of RBC and Astaire in respect of,inter alia, any claim for breach of any of the warranties or any claim in connection withthe Placing and RBC’s or Astaire’s performance of services in relation to the Placing.15.6.7 RBC (after prior consultation with Astaire) may terminate the Placing Agreement incertain specified circumstances prior to Admission, principally, if any of the warrantieshas ceased to be true and accurate or shall have become misleading in any respect, ineither case, to an extent which, in the opinion of RBC, is material in the context ofthe Placing.15.7 RBC WarrantThe Company has agreed to enter into the warrant agreement with RBC on Admission,pursuant to which the Company will grant to RBC a warrant to subscribe for 1,250,000 newOrdinary Shares at the Placing Price, exercisable by RBC (in whole or in part) at any time inthe 2 year period following Admission.15.8 Lock-In AgreementEach of the Existing Directors and the Proposed Directors, African Aura and Altima (the“Locked-In Persons”) has entered into Lock-in agreements on 27 January 2010 with theCompany and RBC. Pursuant to the Lock-In Agreements, the Locked-In Persons have eachagreed not to dispose of any interest in Ordinary Shares held on Admission for a period of12 months (or 3 months in the case of Altima) from the date of Admission, except in limitedcircumstances, or with the prior written consent of RBC and the Company. The Lock-InAgreements also contain orderly market provisions which apply for a further period of 12 months(or 3 months in the case of Altima) after expiry of the initial lock-in period.15.9 Relationship AgreementDetails of the Relationship Agreement entered into between African Aura, the Company andStellar are set out in paragraph 17 of Part I of this document.15.10 Convertible Agreements15.10.1 Stellar Convertible Loan NotesWith a view to funding working capital costs, primarily for the Mandala alluvialdiamond project in Guinea, the Company granted a total of US$575,000 convertibleloan notes to five separate entities between 6 May and 17 June 2009. The indebtednessand obligations represented by the notes were to be secured over the MB 100DMS/Flow-sort recovery process plant, mine fleet and equipment located at theMandala project. The holders of the Stellar Convertible Loan Notes each have the rightto convert all or any amount of the principal amount of the respective loans at any timeprior to the close of business on 31 January 2010 into Stellar Shares at a conversionprice of £0.20 per share. Interest of 20 per cent. per annum is payable on maturity on theprincipal amount and can also be converted into equity in the capital of the Company atthe election of the holder. Conversion of interest also entitles the holder, for every share282

arising on conversion of the principal and interest, to the issue of one warrant tosubscribe for Stellar Shares at £0.25 per share expiring on 30 June 2010. The proposedtreatment of the Stellar Convertible Loan Notes on account of the Proposals is set out atparagraph 8 of Part I.15.10.2 Stellar Convertible DebtOn 21 September 2009 Stellar issued a £300,000 secured convertible loan to a shareholder,Altus, to assist Stellar in funding the purchase of additional earth moving vehicles and forworking capital purposes, primarily for the Mandala alluvial diamond project in Guinea.Interest is payable at 16.5 per cent. per annum, payable on a six monthly basis in cash orStellar shares at Altus’ discretion. The loan note also provided for security to be grantedover the MB 100 DMS/Flow-sort recovery process plant, mine fleet and equipment locatedat the Mandala project with a book value of $3.8m. Altus has the right to convert all or anyamount of the principal at any time prior to the close of business on 21 September 2011into Stellar Shares at £0.20 per share. Upon such conversion of the principal Amount, anyaccrued interest shall be paid in cash. On conversion, Altus also receives a further warrantto subscribe for Stellar Shares exercisable at £0.25p per share for 24 months fromconversion. The loan matures on 21 September 2011 (or is repayable sooner if the relevantcovenants and conditions are not observed). In the event of an acquisition of Stellar, Altushas the right to convert the principal and interest into shares of the acquiring company onthe same terms as Stellar shareholders. Any change of control in Stellar (meaning theacquisition of voting control or direction over 50.1 per cent. or more of the aggregatevoting rights attached to Stellar Shares) shall constitute an irrevocable offer by Stellar topurchase the loan note at 101 per cent. of the principal amount within 60 days after thechange of control, together with all accrued and unpaid interest on the principal amount,The proposed treatment of the Stellar Convertible Debt on account of the Proposals is setout at paragraph 8 of Part I.15.11 WAD Mineral Rights and LicencesSierra Leone15.11.1 Thunderball – EXPL 8/2002The Company entered into a memorandum of understanding with Thunderball on14 August 2009 pursuant to which Thunderball agreed to apply for an exploration andgeneral mining licence, which the Company would support. All the Company’s accruedrights in respect of such licence would be included in the licence granted to Thunderballand Thunderball would exercise absolute control and management of the licence. Underthese arrangements the Company is entitled to 20 per cent. of carried interest up tocommencement of commercial production and is entitled to nominate a director to theboard of Thunderball. Pursuant to this arrangement exploration licence EXPL 8/2002 hasbeen transferred to Thunderball.15.11.2 Pyramid Resources – ML1/2004 and EPL11/200215.11.2.1An agreement with Pyramid, a locally owned Sierra Leone mining company,was signed by WAD during September 2009 and was further supplemented byan agreement between WAD and Pyramid dated 17 December 2009(“Agreement”). Pursuant to the Agreement the Company agreed to transferMining Lease ML1/2004 to Pyramid subject to the consent of the relevantMinister of Sierra Leone in consideration for a 5 per cent. royalty payment onthe value of a product mined or extracted pursuant to that licence as determinedby the Government Gold and Diamond Office in Sierra Leone. The Companyhas agreed to update three prospective areas of licence No. EPL 11/2002 toexploration status in consideration for a 5 per cent. royalty payment should thelicence achieve mining licence status. Pursuant to the Agreement Pyramid shallbe responsible for all rights, obligations and liabilities in respect of ML1/2004and for all costs and expenses (including outstanding licence fees) in relationto EPL11/2002.283

15.11.2.2On 19 October 2009, an application for transfer relating to Mining LeaseML1/04 issued on 23 March 2004 was signed pursuant to which the Companyrequested transfer of the licence to Pyramid.15.11.3 African DiamondsSince the admission of WAD to AIM in January 2007, African Diamonds has held itsinterest in the licences in Sierra Leone identified in the table on page 24 in trust forWAD. Pursuant to deeds of declaration between African Diamonds and WAD, AfricanDiamonds has agreed that it will deal with those licences at all times as and only asdirected by WAD and on behalf of WAD.Guinea15.11.4 Option Agreement with MacGregor Crowe LimitedOn 8 December 2006 the Company entered into an option agreement with MacGregorCrowe Limited (“MacGregor”). Under the terms of the option agreement the Companyacquired the right to require MacGregor to transfer to it a prospecting licence(A2009/197/DIGM/CPDM) upon its conversion to a semi-industrial licence. Theconsideration for the grant of the option to the Company, which has not yet beenexercised, was the payment of £14,611 by the Company to MacGregor and the paymentof certain royalties calculated as three per cent., of inter alia, any minerals mined orotherwise extracted from the land which is covered by the licence or subsequentlicences over that area, as approved by the Bureau National D’expertise Des Diamantset Matieres of the Republic of Guinea. MacGregor provided limited warranties (inrelation to the licence) in favour of the Company under the option agreement. Theliability of MacGregor under the option agreement is limited to the consideration paidby the Company.15.11.5 Share Purchase Agreement with Castlebay Resources LimitedOn 8 December 2006 the Company entered into a share purchase agreement with theshareholders of Castlebay Resources Limited, then a company controlled by Mr StuartMacGregor, a son of Mr James MacGregor, a former director of WAD. Under the termsof the share purchase agreement the Company acquired the entire issued share capital ofCastlebay Resources Limited (including licences held by Castlebay Resources Limited).The agreement provides that WAD is obliged to pay 3 per cent. of the value of anyminerals (including, without limitation, rough natural diamonds and gold) mined orotherwise extracted from the land which is covered by licence Nos. A2009/199 andA2009/198 or any subsequent licences from which WAD benefits and any materialsrefined or made from such minerals, as appraised by the Bureau National D’expertiseDes Diamants et Matieres Precluses of the Republic of Guinea. The royalty payment isdue within fourteen business days of the product being exported from or sold in theRepublic of Guinea.15.11.6 Letter of Cession: licence no. A2005/015Since the admission of WAD to AIM in January 2007, African Diamonds has held itsinterest in the above licence on trust for WAD. Pursuant to a letter of cession entered intoby African Diamonds in favour of WAD, it has agreed to exercise all rights and powersvested in it as directed by WAD and will apply to obtain or seek the approval of thegovernment of Guinea for the cession of its interests and rights in the licence in favourof WAD prior to 31 March 2010.15.12 Joint Venture Agreement with Petra in relation to the Kono ProjectA joint venture agreement dated 8 June 2007 between African Aura (1), Petra (2) and BasamaDiamonds Limited (Seychelles) (“Basama”) (3) (“JV Agreement”) established Basama as a jointventure company to carry out exploration and development for diamonds on properties held byBasama in Sierra Leone. The JV Agreement was revised by an agreement dated 7 July 2009284

etween Stellar (1), Petra (2), African Aura (3) and Basama (4) (“Amending Agreement”) andacknowledges that the rights and obligations of African Aura under the JV Agreement wereassigned to Stellar with effect from 30 June 2007.The initial participating interests in Basama are Stellar (49 per cent.) and Petra (51 per cent.). Theproperties currently forming part of JV Agreement are two exploration licences in relation to theKono project. If either party directly or indirectly applies to stake or otherwise acquire a mineralinterest or licence of any nature located wholly or partly in the area of common interests (being anarea of 5 kilometres around the properties), that party must notify the board of Basama who maydecide whether such mineral interest shall form part of the properties subject to the JV Agreement.The Basama board is currently comprised of three Directors (two from Petra and one fromStellar). It is the intention of the New Board that another director of the Company will beappointed to the board following Completion.Petra was the initial operator of the joint venture until 31 December 2008 (“the Petra FundingPeriod”). Stellar was the operator from 1 January 2009 to 20 December 2009 (“the Stellar FundingPeriod”). All expenditure by the operator in carrying out its duties under the joint venture is fundedby Basama which is in turn funded by the other parties. The operator is entitled to receive a feeequal to (a) ten per cent. of expenditure during the exploration phase; (b) five per cent. ofexpenditure during the preparation of feasibility or pre-feasibility and construction of a mine phaseand (c) two per cent. of expenditure during the operation of a mine phase. Petra has the first rightto market any diamonds produced.The Amending Agreement acknowledges that at 20 December 2008 Stellar was in arrears ofUS$689,688 on its funding requirements in respect of Basama during the Petra Funding Periodand that Petra had paid this sum to Basama on behalf of Stellar. This payment is governed by aseparate loan agreement between Petra and Stellar details of which are set out at below.The Amending Agreement requires Stellar to fund Basama solely during the Stellar FundingPeriod and to pay in advance all sums which Petra is required to pay. If Stellar has made suchpayment, Petra has the option prior to but no later than 20 December 2009 (1) to pay to StellarPetra’s share for 2009 based on Petra’s participating interest at 7 July 2009, together with interestat US$ LIBOR plus 5 per cent; or (2) to have its interest diluted in accordance with the terms ofthe JV Agreement for non payment of its funding requirement. This date has now passed and theparties have agreed to extend the maturity of the Petra loan to 28 February 2010 and agree theterms of Petra’s dilution for non-payment of its share for 2009 funding before 31 December 2010.Otherwise, unless terminated by written agreement, the JV Agreement will terminate when onlyone party holds a participating interest.15.13 Petra Loan AgreementA loan agreement dated 7 July 2009 (the “Loan Agreement”) made between (1) Stellar, (2) Petraand (3) African Aura as guarantor. The principal amount of the loan made by Petra to Stellarunder the Loan Agreement (the “Loan”) is US$689,688 being an amount paid by the Petra toBasama on behalf of Stellar under the JV Agreement during the Petra Funding Period.Interest is expressed to be payable 6 monthly in arrears on 30 June 2009 and 20 December 2009.Only the first 6 monthly interest payment has been made by Stellar to date. The rate of interest isthe rate per annum calculated by Petra to be 6 month US$ LIBOR plus 5 per cent. The Loan maybe prepaid in whole or part (with accrued interest on the amount prepaid) at any time. The fullamount (subject to any prepayments and any conversion) is repayable in full on 20 December 2009.Petra may at any time up to the repayment date convert the principal amount of the Loan (togetherwith accrued interest) into ordinary shares of the Stellar. There are a number of usual events ofdefault which entitle the Petra to accelerate repayment and serve demand whereupon all amountsbecome immediately due and payable.285

African Aura as guarantor has irrevocably and unconditionally guaranteed the punctualperformance by the Stellar of its obligations under the Loan Agreement.The parties have agreed to extend the repayment date for the loan and the second tranche ofinterest to 28 February 2010 and to cancel Petra’s rights of conversion.15.14 Royalty Agreement15.14.1 On 11 January 2005, Debsam Guinea, African Aura and Mano Guinea entered into anagreement pursuant to which Mano Guinea would acquire certain rights to explorationdata from Debsam Guinea.15.14.2 Pursuant to an agreement of cessation and delegation between Debsam Guinea, Debsamand African Aura, Debsam Guinea ceded its rights and delegated its obligations under theRoyalty Agreement to Debsam.15.14.3 In consideration of the exploration data having been provided by Debsam Guinea toAfrican Aura and/or Mano Guinea, Debsam is entitled to be paid a royalty of two per cent.of the gross sales proceeds generated in any quarter by kimberlite projects owned byAfrican Aura or Mano Guinea in the three Bouro licence areas.15.14.4 The royalty payment is payable to Debsam at the end of each calendar quarter for so longas African Aura or Mano Guinea generate sale proceeds from kimberlite mines withinthe three Bouro licence areas.15.15 Africa Aura Loans15.15.1 African Aura has made three loans totalling US$600,000 to Stellar for working capitalpurposes. The New Board intends to repay these amounts from the proceeds ofthe Placing.16. Litigation16.1 The Company is considering issuing proceedings against Linatex Africa (Pty) Limited (“Linatex”)a company incorporated under the laws of the Republic of South Africa. The potential disputerelates to the manufacture, supply and installation by Linatex of a Linatex flat bottom classifier2.4m diameter and related equipment (“Equipment”) at a cost of approximately R489,516(approximately US$65,115) plus VAT and delivery costs at the Koidu site in Sierra Leone. TheCompany alleges that the Equipment was not in accordance with specifications or agreed uponcapacities and capabilities. The Company is considering seeking reimbursement of the purchaseprice paid of approximately R489,516 and payment of damages suffered in the sum ofapproximately US$642,058 together with interest and costs. The Company has not yet issuedproceedings in this matter but must decide whether to do so within the next three months.16.2 Save as disclosed in paragraph 16.1 above, there are no governmental, legal or arbitrationproceedings (including any such proceedings which are pending or threatened of which theExisting Directors or Proposed Directors are aware) in which the Group or Enlarged Group isinvolved which may have or have had in the twelve months preceding the date of this documenta significant effect on the Group or Enlarged Group’s financial position or profitability.17. Intellectual Property Rights17.1 The Company has the following domain names: wadiamonds.com and westafdiamonds.com,ownership of which has been renewed for five years to the 29 August 2012.17.2 The Stellar Group has the following domain name: stellar-diamonds.com.17.3 Save as disclosed in paragraph 18.1 above, there are no patents or intellectual property rights, licensesor particular contracts which are of fundamental importance to the Enlarged Group’s business.286

18. Investments18.1 Save as set out in this document, there are no:18.1.1 investments in progress which are significant to the Group or Enlarged Group; or18.1.2 future investments upon which the Company, Group or Enlarged Group or itsmanagement have already made firm commitments.19. Working Capital19.1 The Existing Directors and the Proposed Directors are of the opinion that, having made due andcareful enquiry, the working capital available to the Enlarged Group will, from the time ofAdmission be sufficient for its present requirements, that is for at least 12 months from the dateof Admission.20. Information Relating to the Placing20.1 There is no minimum amount which, in the opinion of the Existing Directors and the ProposedDirectors, must be raised by the Company pursuant to the Placing.21. Environmental Issues21.1 Save as set out in Parts I to III of this document, neither the Company, the Existing Directors northe Proposed Directors are aware of any environmental issues or risks affecting the utilisation ofthe property, plant or machinery of the Group or Enlarged Group.22. Related Party Transactions22.1 Details of the Relationship Agreement entered into between African Aura, the Company andStellar are set out in paragraph 17 of Part I of this document.22.2 Details of the additional related party transactions as set out in note 21 to the Accountants’ Reporton the Stellar Group in Part VIII of this document.22.3 Cooley Distillery plc is a related party by virtue of common directors with WAD. WAD sharesoffices and overheads with Cooley Distillery plc. For the financial year ended 30 April 2009 anamount of £26,667 was incurred by Cooley Distillery plc on behalf of WAD in respect of thesemanagement charges. As at 30 April 2009, there was £26,153 due to Cooley Distillery plc.22.4 African Diamonds plc is a related party by virtue of common directors with WAD. AfricanDiamonds plc holds a 5.56 per cent. investment in WAD. WAD shares offices and overheads withAfrican Diamonds plc. For the financial year ended 30 April 2009 an amount of £34,300 wasincurred by African Diamonds plc on behalf of WAD in respect of these overheads.22.5 African Aura and Stellar have agreed to capitalise an intra-group debt referable to 2009administration fees charged by African Aura, resulting in the issue and allotment of 454,545Stellar Shares to African Aura.22.6 Save as set out in paragraph 22.1 to 22.5 above, there are no related party transactions that theEnlarged Group has entered into during the period covered by the historical financial informationset out in Part VIII and up to the date of this document.23. General Information23.1 The total proceeds of the Placing are expected to be £5 million. The estimated amount of theexpenses of the Placing and Admission which are all payable by the Company, is approximately£0.7 million (including VAT). The net proceeds of the Placing will be approximately £4.3 million.287

23.2 Mazars LLP of Tower Bridge House, St Katherine’s Way, London E1W 1DD has given and notwithdrawn its written consent to the inclusion in this document of references to its name in theform and context in which they appear.23.3 Royal Bank of Canada Europe Limited of 71 Queen Victoria Street, London EC4V 4DE hasgiven and not withdrawn its written consent to the inclusion in this document of references to itsname in the form and context in which they appear.23.4 MPH Consulting Limited of Suite 501, 133 Richmond Street W, Toronto, Ontario, Canada hasgiven and not withdrawn its written consent to the inclusion in this document of references to itsname in the form and context in which they appear.23.5 Astaire Securities plc of 30 old Broad Street, London EC2N 1HT has given and not withdrawnits written consent to the inclusion in this document of references to its name in the form andcontext in which they appear.23.6 The financial information contained in this document does not constitute full statutory accountsas referred to in section 434 of the 2006 Act.23.7 There are not, neither in respect of the Company nor any company in the Enlarged Group, anysignificant recent trends in production, sales and inventory, and costs and selling prices since theend of the last financial year to the date of this document.23.8 There are not, neither in respect of the Company nor any company in the Enlarged Group, anyknown trends, uncertainties, demands, commitments or events that are reasonably likely to havea material effect on the prospects for at least the current financial year of the Company or theEnlarged Group.23.9 Save as disclosed in this document, there has been no significant change in the financial ortrading position of the WAD since 31 October 2009, the date to which the Interim Accounts (thetext of which is set out in Part VII of this document) were prepared.23.10 Save as disclosed in this document, there has been no significant change in the financial or tradingposition of Stellar since 30 September 2009, the date to which audited financial information waspublished (the text of which is set out in Part VIII of this document) were prepared.23.11 The Existing Ordinary Shares are, and the New Ordinary Shares will be, in registered form. Notemporary documents of title will be issued.23.12 No person, either directly or indirectly, has in the twelve months prior to the date of this documentreceived or is contractually entitled to receive either directly or indirectly, from the Company on orafter Admission (excluding in either case persons who are professional advisers or as otherwisedisclosed in this document and trade suppliers) (i) fees totalling £10,000 or more; (ii) its securities,where these have a value of £10,000 or more calculated by reference to the Placing Price; or (iii) anypayment or benefit from the Company to the value of £10,000 as at the date of Admission.23.13 Of the Placing Price, £0.05 represents the nominal value of each Placing Share and £0.15 the premium.23.14 Monies received from applicants pursuant to the Placing will be held in accordance with the termsof placing letters issued by RBC and Astaire until such time as the Placing Agreement becomesunconditional in all respects. If the Placing Agreement does not become unconditional in all respectsby 31 March 2010, application monies will be refunded to applicants at their risk andwithout interest.23.15 Deloitte & Touche, Chartered Accountants of Earlsfort Terrace, Dublin 2, Dublin, Ireland, wereauditors of the Company for the period relating to the accounts set out in Part VII of this document.Deloitte is a member of the Institute of Chartered Accountants in Ireland.23.16 Deloitte & Touche has given and has not withdrawn their written consent to the issue of thisdocument with the references herein to their name in the form and context in which it appears.288

23.17 To the extent that information in this document has been sourced from a third party, such informationhas been accurately reproduced and, as far as the Existing Directors, the Proposed Directors and theCompany are aware and able to ascertain from information published by that third party, no facts havebeen omitted which may render the reproduced information inaccurate or misleading.24. Availability of this document24.1 Copies of this document shall be available free of charge during normal business hours on anyday (except Saturdays, Sundays and public holidays) from RBC at 71 Queen Victoria Street,London EC4V 4DE for a period of one month from the date of Admission.Date: 27 January 2010289

PART XINOTICE OF GENERAL MEETINGWEST AFRICAN DIAMONDS PLC(Incorporated and registered in England and Wales with registered number 5424214)NOTICE IS HEREBY GIVEN that a GENERAL MEETING of the Company will be held at 71 QueenVictoria Street, London EC4V 4DE on 19 February 2010 at Midday for the purpose of considering and, ifthought fit, passing the following resolutions, each of which will be proposed as a special resolution:1. THAT, conditional only upon the Placing Agreement (as such term is defined in the circular toshareholders of the Company dated 27 January 2010, a copy of which has been produced to thismeeting and initialled by the Chairman for the purposes of identification only (the “Circular”))becoming unconditional (save only for the passing for the this resolution and Admission (as suchterm is defined in the Circular) and the Placing Agreement not being terminated in accordancewith its terms:a) all of the existing ordinary shares of £0.01 each in the capital of the Company, whether issuedor unissued, (“Existing Ordinary Shares”) be and are hereby consolidated into new ordinaryshares of £0.05 each in the capital of the Company (“Consolidated Ordinary Shares”) on thebasis of one Consolidated Ordinary Share for every 5 Existing Ordinary Shares;b) if resolution 2 below is not passed, the authorised share capital of the Company beincreased from £2,000,000 to £10,000,000 by the creation of 160,000,000 additionalordinary shares of £0.05 each in the capital of the Company;c) the acquisition by the Company of Stellar Diamonds Limited (“Stellar”) pursuant to a saleand purchase agreement dated 27 January 2010, and pursuant to agreements between theCompany, Stellar and holders of certain options, warrants and convertible debt in relationto shares in Stellar, all as described in the Circular, on the terms and subject to theconditions of each of such agreements, be and is hereby approved and the directors (or aduly authorised committee thereof) be and they are hereby authorised to take all steps asmay be necessary or appropriate to complete such agreements and to carry the same intoeffect with such modifications, variations, revisions, waivers or amendments thereto(providing such modifications, variations, revisions, waivers or amendments are not of amaterial nature) or any documents relating thereto as they shall deem necessary, expedientor appropriate and to do and/or procure that all such acts and/or things are done as they mayconsider necessary and/or desirable in connection therewith;d) the directors be and are hereby generally and unconditionally authorised, in accordancewith section 551 of the Companies Act 2006 (“2006 Act”), to exercise all the powers of theCompany to allot:(i)new ordinary shares of £0.05 each in the capital of the Company in the followingnominal amounts:(A)(B)(C)£2,679,919.50 to the Vendors pursuant to the Acquisition Agreement and£75,375 pursuant to the Stellar Convertible Debt (each as defined inthe Circular);up to £1,378,006.35 to holders of New Warrants and new Options (as each isdefined in the Circular) upon the exercise of such rights; andup to £1,250,000 in connection with the Placing (as defined in the Circular); and290

(ii)Relevant Securities (as defined in the notes to this resolution) up to an aggregatenominal amount of £1,615,528 provided that this authority shall (unless renewed,varied or revoked by the Company in general meeting) expire on the conclusion ofthe next annual general meeting of the Company to be held in 2010, save that theCompany may before such expiry make an offer or agreement which would or mightrequire Relevant Securities to be allotted after such expiry, and the directors mayallot such Relevant Securities in pursuance of such offer or agreement as if thisauthority had not expired, and provided further that this authority shall replace theexisting authority to allot shares given to the directors pursuant to section 80 of theCompanies Act 1985;e) the amended rules of the share option scheme of the Company (“Share Option Scheme”),the principal terms of which are summarised in the Circular and as shown in the rules ofthe Share Option Scheme produced to the meeting and initialled by the Chairman for thepurpose of identification, be and are hereby approved and that the directors be and arehereby authorised to do all such acts and things as they may consider appropriate toimplement the amended rules of the Share Option Scheme;f) the directors be and are hereby empowered, pursuant to Section 570 of the 2006 Act, to allot:i) the new ordinary shares in the aggregate nominal amounts referred to in resolution1(d)(i)(B) and (C) above pursuant to that authority as if section 561(1) of the 2006Act did not apply to such allotment;ii) equity securities (as defined by section 560 of the 2006 Act) for cash, either pursuantto the authority conferred by resolution 1(d)(ii) or by way of a sale of treasury shares,as if section 561(1) of the 2006 Act did not apply to any such allotment, provided thatthis power shall be limited to the allotment of equity securities pursuant to an offeror issue by way of rights, open offer or other pre-emptive offer:(A) to the holders of ordinary shares and other persons entitled to participate thereinin proportion (as nearly as may be practicable) to their respective holdings; and(B) to holders of other equity securities as required by the rights of those securitiesor as the directors otherwise consider necessary,but subject to such exclusions or other arrangements as the directors may deemnecessary or expedient in relation to treasury shares, fractional entitlements, recorddates, legal or practical problems in or under the laws of any territory or therequirements of any regulatory body or stock exchange; andiii) otherwise than pursuant to paragraph 1(f)(i) and (ii) above, equity securities up toan aggregate nominal amount of £484,658,and such power shall expire (if not previously expired by non-fulfilment of conditions) onthe date of the next annual general meeting of the Company to be held in 2010 save that theCompany may before such expiry make an offer or agreement which would or might requireequity securities to be allotted after such expiry and the board may allot equity securities inpursuance of any such offer or agreement as if the power conferred hereby had not expired.This resolution revokes and replaces all unexercised powers previously granted to thedirectors to allot equity securities as if either section 89(1) of the Companies Act 1985 didnot apply but without prejudice to any allotment of equity securities already made or agreedto be made pursuant to such authorities; andg) the name of the Company be changed to Stellar Diamonds plc.2 THAT:a) the articles of association of the Company be amended by deleting all the provisions of theCompany’s memorandum of association which, by virtue of section 28 of the CompaniesAct 2006 are treated as provisions of the Company’s articles of association; and291

) the draft regulations produced to the meeting and initialled by the Chairman for thepurposes of identification be adopted in substitution for, and to the exclusion of, the currentArticles of Association.Dated: 27 January 2010By Order of the BoardRegistered office:20-22 Bedford Road,LondonWC1R 4JSNotes:1. Relevant Securities means:(a) Shares in the Company other than shares allotted pursuant to:(i) an employee share scheme (as defined by section 1166 of the 2006 Act);(ii) a right to subscribe for shares in the Company where the grant of the right itself constituted a Relevant Security; or(iii) a right to convert securities into shares in the Company where the grant of the right itself constituted aRelevant Security.(b) Any right to subscribe for or to convert any security into shares in the Company other than rights to subscribe for orconvert any security into shares allotted pursuant to an employee share scheme (as defined by section 1166 of the 2006Act). References to the allotment of Relevant Securities in the resolution include the grant of such rights.2. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf atthe meeting. A shareholder may appoint more than one proxy in relation to the General Meeting provided that each proxy isappointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be ashareholder of the company. A Form of Proxy which may be used to make such appointment and give proxy instructionsaccompanies this notice. If you do not have a Form of Proxy and believe that you should have one, or if you require additionalforms, please contact Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate,Dublin 18, Ireland.3. To be valid any Form of Proxy or other instrument appointing a proxy must be received by post or (during normal businesshours only) by hand at Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate,Dublin 18, Ireland no later than midday on 17 February 2010.4. The return of a completed Form of Proxy, other such instrument or any CREST Proxy Instruction (as described in paragraph 7below) will not prevent a shareholder attending the General Meeting and voting in person if he/she wishes to do so.5. To be entitled to attend and vote at the General Meeting (and for the purpose of determination by the company of the votesthey may cast), shareholders must be registered in the register of members of the company at 6.00 pm on 17 February 2010(or, in the event of any adjournment, 6.00 pm on the date which is two days before the time of the adjourned meeting). Changesto the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attendand vote at the meeting.6. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do soby using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, andthose CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting serviceprovider(s), who will be able to take the appropriate action on their behalf.7. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear’s specifications, and mustcontain the information required for such instruction, as described in the CREST Manual. The message, regardless of whetherit constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, inorder to be valid, be transmitted so as to be received by the issuer’s agent ID 3RA50 by midday on 17 February 2010. For thispurpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by theCREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the mannerprescribed by CREST. After this time any change of instructions to proxies appointed through CREST should becommunicated to the appointee through other means.8. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear doesnot make available special procedures in CREST for any particular message. Normal system timings and limitations will,therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concernedto take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting serviceprovider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensurethat a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and,where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of theCREST Manual concerning practical limitations of the CREST system and timings.9. The company may treat as invalid a CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of theUncertificated Securities Regulations 2001.292

APPENDIXEXPLANATORY NOTES OF PRINCIPAL CHANGES TO THE COMPANY’SEXISTING ARTICLES OF ASSOCIATIONIt is proposed in Resolution 2 of the Notice of General Meeting to adopt the New Articles of Associationin order to update and replace the Existing Articles of Association, primarily to take account of changesin English company law brought about by the Companies Act 2006, the final part of which came intoforce on 1 October 2009.The principal changes introduced in the New Articles are summarised in this Explanatory Note. Otherchanges, which are of a minor, technical or clarifying nature and also some more minor changes whichmerely reflect changes made by the Companies Act 2006 have not been noted in this Explanatory Note.The Existing Articles and the New Articles are available for inspection on the Company’s website athttp://www.westafdiamonds.com.1. The Company’s objectsThe provisions regulating the operations of the Company are currently set out in the Company’smemorandum and articles of association. The Company’s memorandum contains, among other things,the objects clause which sets out the scope of the activities the Company is authorised to undertake. Thisis drafted to give a wide scope.The Companies Act 2006 significantly reduces the constitutional significance of a company’s memorandumof association. The Companies Act 2006 provides that a memorandum will record only the names of theoriginal subscribers and the number of shares each subscriber has agreed to take in the company. Under theCompanies Act 2006 the objects clause and all other provisions which are currently contained in acompany’s memorandum, for existing companies at 1 October 2009, will be deemed to be contained in acompany’s articles of association unless the company passes a special resolution to the contrary.Further, the Companies Act 2006 states that, unless a company’s articles provide otherwise, a company’sobjects are unrestricted. This abolishes the need for companies to have objects clauses. The Companyis proposing to remove its objects clause together with all other provisions of its memorandum which,by virtue of the Companies Act 2006, are to be treated as forming part of the Company’s articles ofassociation as of 1 October 2009 to allow it to have the widest possible scope for its activities.Resolution 2(a) confirms the removal of these provisions for the Company. As the effect of thisResolution will be to remove the statement currently in the Company’s memorandum of associationregarding limited liability, the New Articles also contain an express statement regarding the limitedliability of shareholders.2. Change of nameCurrently, a company can only change its name by special resolution. Under the Companies Act 2006a company will be able to change its name by other means provided for by its articles. To take advantageof this provision, the New Articles enable the directors to pass a resolution to change the Company’sname (Article 4).3. Authorised share capital and unissued sharesThe Companies Act 2006 abolishes the requirement for a company to have an authorised share capital.The New Articles do not provide for an authorised share capital and so a consequence of Resolution 2would be the removal of this limitation from the Company’s constitution. Directors will still be limitedas to the number of shares they can at any time allot because an allotment authority continues to berequired under the Companies Act 2006, save in respect of employee share schemes. Resolutions 1(d)and (f) set out the limits that the members are being asked to approve in respect of allotment and issueof new shares at the General Meeting.293

4. Redeemable sharesUnder the old law, if a company wished to issue redeemable shares, it needed to include in its articlesthe terms and manner of redemption. The Companies Act 2006 enables directors to determine suchmatters instead provided they are so authorised by the articles. The New Articles contain such anauthorisation (Article 5.3). The Company has no plans to issue redeemable shares but if it did so thedirectors would need shareholders’ authority to issue new shares in the usual way.5. Situational conflicts of interestAs from 1 October 2008, a new regime was introduced by the Companies Act 2006 relating to director’sconflicts of interest. Under section 175 of the Act each director must avoid a situation in which he has,or can have, a direct or indirect interest that conflicts or possibly may conflict, with the interests of theCompany. Notwithstanding the fact that the duty acts as an absolute prohibition on so called “situationalconflicts”, the Act does permit such conflicts to be authorised by the directors provided they have beengiven the power to do so by the members (this usually takes the form of an amendment to the articles).If the articles are not amended to permit the directors to authorise these conflicts, it would benecessary for the members to do so by passing a resolution in respect of each conflict (which isadministratively inconvenient).The New Articles therefore include the requisite provisions, subject to certain limitations (see Article 31).6. Notice periods for meetingsThe Act reduces the periods of notice required for general meetings. General meetings (other than annualgeneral meetings, which will still require 21 days’ notice) can now be held on 14 days’ notice regardlessof what type of resolution is being proposed. This is, however, subject to anything to the contrary in thearticles (at present the Company has to give 21 days’ notice if a special resolution is to be proposed and14 if an ordinary resolution is to be proposed). Article 16 of the New Articles provides that the Companyshall give such notice as is required by law for all general and annual general meetings.7. Authority to purchase own shares, consolidate and sub-divide shares, and reduce share capitalUntil 1 October 2009 a company required specific enabling provisions in its articles to purchase its ownshares, to consolidate or sub-divide its shares and to reduce its share capital or other undistributablereserves as well as shareholder authority to undertake the relevant action. The Existing Articles includethese enabling provisions. Under the Companies Act 2006 a company will only require shareholderauthority to do any of these things and it will no longer be necessary for articles to contain enablingprovisions. Accordingly the relevant enabling provisions have not been included in the New Articles.8. Provision for employees on cessation of businessThe Companies Act 2006 provides that the powers of the directors of a company to make provision fora person employed or formerly employed by the company or any of its subsidiaries in connection withthe cessation or transfer to any person of the whole or part of the undertaking of the company or thatsubsidiary, may only be exercised by the directors if they are so authorised by the company’s articles orby the company in general meeting. The New Articles provide that the directors may exercise this power.9. Use of sealsUnder the old law a company required authority in its articles to have an official seal for use abroad.Such authority is no longer required. Accordingly, the relevant authorisation has not been included inthe New Articles.For consistency with the Companies Act 2006 changes to the execution of documents by companies, theNew Articles provide an alternative option for affixing a seal. Under the New Articles (Article 34),when the seal is affixed to a document it may be signed by one authorised person in the presence of awitness, whereas previously the requirement was for signature by either a director and the secretary ortwo directors or such other person or persons as the directors may approve.294

10. Suspension of registration of share transfersThe Existing Articles permit the directors to suspend the registration of transfers. Under the CompaniesAct 2006 share transfers must be registered as soon as practicable. The power in the Existing Articlesto suspend the registration of transfers is inconsistent with this requirement. Accordingly, this power hasnot been included in the New Articles.11. GeneralGenerally, the opportunity has been taken to update some of the language and drafting in the NewArticles with the intention of making the drafting of some of the existing provisions more clear.295

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