The firm said yesterday it would use the funds to advance its key projects at Droujba in Guinea and Tongo in Sierra Leone.

Northland rates the stock a 'buy' and analyst Dr Ryan Long said today: "Stellar has completed a £2m fund raising despite the disappointing developments at the Kono project, highlighting continued investor confidence in the remaining projects."

It comes after the company revealed last month that Sierra Leone's Ministry of Mines had claimed the company's two licences in the Kono district should not have been renewed.

In Sierra Leone, the company has the Tongo licence as well as the two in the Kono district.

Stellar had disputed the assertion and said it was seeking clarification of the position with the Ministry. 

In yesterday's announcement, the company said in regard to the Kono dispute that it was "continuing dialogue with the Government of Sierra Leone "to satisfactorily resolve the issue".

The cash call saw around 66.9 million company shares issued to institutional and other investors at 3 pence a share (current share price: 3.13 pence).

Stellar said it planned to carry out further drilling and bulk sampling to increase the company's resource base and commence pre-feasibility studies to determine the economic potential of these high grade projects.

At Droujba in Guinea, drilling and bulk sampling is planned using £0.6 million of the funds raised, while, at Tongo in Sierra Leone, further drilling and sampling will be carried out at a cost of £0.3 million.

Stellar said that £1 million will be used for working capital.

Dr Long said today he viewed the pre-feasibility study for Droujba and Tongo as a catalyst to move the company to producer from explorer.

Stellar Diamonds (LON:STEL) says it will advance its key projects at Droujba and Tongo as it announced a placing to raise £2 million.

The aim of the cash call is to raise sufficient capital to develop the two projects and increase their total inferred resource base from 3.1 million carats, the firm said.

The company, Northland Capital Partners and Daniel Stewart have carried out the placing which sees around 66.9 million company shares issued to institutional and other investors at 3 pence a share.

Stellar shares are currently trading at 3.13 pence each.

The company's chief executive Karl Smithson said the firm was very pleased with the level of shareholder support.

"We expect to undertake further drilling and bulk sampling with the objective of increasing the company's resource base and commence pre-feasibility studies to determine the economic potential of these high grade projects."

At Droujba in Guinea, drilling and bulk sampling is planned using £0.6 million of the funds raised, while, at Tongo in Sierra Leone, further drilling and sampling will be carried out at a cost of £0.3 million.

Stellar said that £1 million will be used for working capital.

Smithson also updated investors today on the Kono licence dispute and said the company was "continuing dialogue with the Government of Sierra Leone" to satisfactorily resolve the issue.

Last month, the company revealed that the country's Ministry of Mines had claimed its two licences in the Kono district should not have been renewed.

Stellar disputed the assertion and said it was seeking clarification of the position with the Ministry. 

In association with the placing, there will also be a capital reorganisation. 

Both the placing and the reorganisation will be subject to a shareholder vote. Stellar said after the reorganisation, it will have the same number of shares in issue as before the shareholder meeting.

In a note following the announcement, broker Daniel Stewart, said: "We view the success of this placing as a positive affirmation of Stellar Diamonds experienced management team and recognises their work in developing their assets and the upside value of both the Droujba and Tongo projects."

Rating the stock a 'buy' with a target price of 21 pence,  it said it would revisit its model and valuation following the release of Droujba and Tongo resource statements.

Shares in Stellar Diamonds (LON:STEL) soared as brokers hailed the maiden resource estimate for its Tongo project in Sierra Leone as a significant milestone.

The Africa- focused diamond group revealed a JORC compliant 660,000 carat inferred resource for Dyke-1 with a resource grade of 120 carats per hundred tonnes.

Daniel Stewart said the most important figures for investors to focus on are the very high grade and diamond price per carat, reflected in the quantity and quality of the resource of 120cpht and US$225 per carat.

House broker Northland meanwhile said it was reviewing its current price target of 15.1p and said parallels can be drawn between Stellar’s Tongo kimberlite dyke project and Petra Diamond’s long established Fissure Mines.

Fissures are currently the only actively mined kimberlite dykes being mined in the world. 

The ROM grade at Tongo is likely to be c. 54cpht and the average diamond value is estimated to be between $225/ct to $270/ct.

At Fissures, the grade is 39cpht and the average diamond value is $255/ct. 

Combined, this results in a higher value per ROM tonne from Tongo between $122/t and $146/t, compared to $99/t from the Fissures.

The Fissures have a combined strike length of 12.9km, at Tongo 1.9km of the 2.5km long Dyke-1 has been tested and there is further potential from other Dykes in the area (c. 2km). 

The current depth of mining at Fissures is 750m at Tongo the resource extends to a depth of 200m - further drilling could extend the resource to a greater depth.

The Fissures have been in production for more than 50 years and have a remaining 15 years of mine life, demonstrating the longevity that kimberlite dyke operations can have. 

Karl Smithson, Stellar’s chief executive, said: "The high diamond grades and values exhibited by Dyke-1 make it one of the highest value kimberlites in terms of dollars per tonne worldwide."

Smithson added that the maiden inferred resource had confirmed the potential of the Tongo Kimberlite Dyke project and was a “significant milestone” for Stellar Diamonds.

He added that the project also had potential for major expansion and development.

“In addition there is 25% of the mapped strike of Dyke-1 yet to be drilled into the resource category and there is considerable potential to expand the resource with depth. Similar operational kimberlite dyke hosted diamond deposits in South Africa are mined to a depth of 700m below surface. 

"Furthermore, additional resource potential exists from other nearby kimberlite dykes, including the 1km long Dyke-4 which has recently been bulk sampled and returned a diamond grade of 109cpht and an average diamond value of $100 per carat.”

This maiden JORC inferred resource was based on a 1.9km section of the 2.5km long Dyke-1 kimberlite.

Stellar said there was a 600 metre section of Dkye-1 still yet to be drilled in addtion to the potential from deeper drilling to 700 metres and resource drilling of Dyke-4, 

Drilling and bulk sampling of the 800m long Dyke-2, located only 200m to the north of Dyke-1, could also add to the resources, Stellar said.

Shares rose by 13 per cent to 7.25p.

Karl Smithson, Stellar’s chief executive, said: "The high diamond grades and values exhibited by Dyke-1 make it one of the highest value kimberlites in terms of dollars per tonne worldwide."

The report, prepared by CAE Mining, showed a 660,000 carat inferred resource for Dyke-1 with a resource grade of 120 carats per hundred tonnes.

Stellar added that the diamonds’ value of between US$225 and US$270 meant an in-situ diamond value for the site so far of between US$148 million and US$178 million. Cut-off grades were +1.0mm.

Smithson added that the maiden inferred resource had confirmed the potential of the Tongo Kimberlite Dyke project and was a “significant milestone” for Stellar Diamonds.

He added that the project also had potential for major expansion and development.

“In addition there is 25% of the mapped strike of Dyke-1 yet to be drilled into the resource category and there is considerable potential to expand the resource with depth. Similar operational kimberlite dyke hosted diamond deposits in South Africa are mined to a depth of 700m below surface. 

"Furthermore, additional resource potential exists from other nearby kimberlite dykes, including the 1km long Dyke-4 which has recently been bulk sampled and returned a diamond grade of 109cpht and an average diamond value of $100 per carat.”

This maiden JORC inferred resource was based on a 1.9km section of the 2.5km long Dyke-1 kimberlite.

Stellar said there was a 600 metre section of Dkye-1 still yet to be drilled in addtion to the potential from deeper drilling to 700 metres and resource drilling of Dyke-4, 

Drilling and bulk sampling of the 800m long Dyke-2, located only 200m to the north of Dyke-1, could also add to the resources, Stellar said.

Stellar Diamonds (LON:STEL) remains on track to produce maiden resource statements for its kimberlite projects at Droujba in Guinea and Tongo in Sierra Leone this quarter.

Resource drilling has completed at Droujba and bulk sampling is now underway, while both drilling and bulk sampling has finished at Tongo.

The sampling at Tongo’s Dyke 1 revealed 1,150 carats at a final in-situ calculated grade (+1mm) of 121 carats per hundred tonnes and a diamond value of $185/ct on the basis of two aggregated diamond exports made in the report period. 

Stellar added that the results were “highly encouraging,” adding that in-situ value of the Dyke 1 kimberlite is therefore calculated to be $224 per tonne, which is considered to be one of the highest value for kimberlites worldwide.

Chief executive Karl Smithson said that the planned listing of the Koidu diamond mine on the Hong Kong stock market would also raise awareness of its own Kono project in Sierra Leone as it lies adjacent to Kono.

“Excellent progress” had been made on the resource statements over the last six months, he added, with all key milestones achieved not only for the six month period being reported but also for the financial year as a whole.

Stellar generated a loss of US$1.95 million in the six months to December and ended the half-year with US$1 million of cash and US$0.6 million worth of diamonds in stock.

The group added it does not expect rough prices in 2012 to repeat the highs and then lows of 2011, but rather remain more stable. 

“Diamond prices are likely to reflect the balance between short term risk aversion on the demand side and, in the backdrop of limited production increases, the continued strong growth in jewellery demand from Asia that should result in rough diamond price appreciation.”

Stellar Diamonds (LON:STEL) said the microdiamond analysis of its Droujba kimberlite pipe in Guinea has yielded “encouraging results”.

A total of 304 kilograms of drill core has produce 279 diamonds, the largest measuring 2.6 millimetres by 2 millimetres by 1.1 millimetres. The majority of the stones are described as white and colourless.

Construction of a dense media separation (DMS) plant is nearing completion, which will allow bulk sampling of the Droujba pipe.

In total 1,000 tonnes of material will be sampled in four separate batches which have already been extracted and stockpiled.

The company said it is on target to produce a maiden resource estimate in the first quarter of next year.

Stellar chief executive Karl Smithson said: “Microdiamond recovery from the Droujba kimberlite core continues to yield encouraging results. 

“This consignment represented selective samples from the hypabyssal and breccia material and the results confirm our view that the hypabyssal kimberlite is significantly diamondiferous. 

“On site construction of the bulk sampling plant is nearing completion with final commissioning expected shortly. 

“We have made excellent progress at Droujba with our success, to date, demonstrating the significant potential of this project. 

“I look forward to updating shareholders as we progress Droujba towards its maiden resource in the first quarter of 2012. 

“This will be a key milestone for Stellar Diamonds as we look to advance Droujba and enhance the value of our diamond portfolio.” 

Diamond explorer Stellar Diamonds (LON:STEL) has completed resource drilling of the Droujba kimberlite pipe in Guinea and will start bulk sample processing next month, it said today.

Stellar added that it remains on track for a JORC compliant resource estimate for both Droujba and also the Tongo project, in Sierra Leone, by the end of the first quarter of 2012.

Some 31 holes for 7,457.15m were drilled into the Droujba pipe with the deepest intersection some 414m below surface. Stellar said the pipe remained open at depth.

Karl Smithson, chief executive, said the bulk sampling will mean a representative parcel of diamonds for grade and value estimation can be produced.

“Initial indications from processed diluted stockpiled overburden are encouraging and demonstrate potential for a coarse diamond size distribution for the pipe, though this is based on the relatively small diamond parcel produced to date,” he added.

The overburden samples found 176 diamonds totalling 56.67 carats of diamond, giving an average stone size of 0.32 per carat, though nine stones weighed over one carat, with the largest diamonds being 4.28, 4.18, 2.76, 2.71 and 1.94 carats in size.

Approximately 23 per cent of the diamonds were of gem quality, although the parcel was not sufficiently large to provide a representative diamond valuation at this stage, Stellar said.

Droujba is the larger of Stellar’s two main prospects. Discovered in the 1960s by the Russians, it was only mined down to 20 metres as it was believed there was nothing below that depth.

"Stellar Diamonds is keeping to the Droujba Project timeline targets and the recent dip in the diamond market has, in our opinion left Stellar Diamonds looking attractive and our price target of 14.3 pence remains unchanged with an upside of 260 per cent on the current share price," said analyst at broker Northland Dr Ryan Long.

Long noted that the DMS processing plant is currently under construction at Droujba and is expected to be commissioned in December this year.

Once running, Stellar Diamonds will begin to collect and process the initial 1,000 tonnes of kimberlite for the bulk sample to confirm the ore body’s grade by the first quarter of 2012, he said.

Shares in the company are currently trading at 3.75 pence each.

Stellar added it remains on track for a JORC compliant resource estimate for both Droujba and also the Tongo project, in Sierra Leone, by the end of the first quarter of 2012.

Some 31 holes for 7,457.15m were drilled into the Droujba pipe with the deepest intersection some 414m below surface. Stellar said the pipe remained open at depth.

Karl Smithson, chief executive, said the bulk sampling will mean a representative parcel of diamonds for grade and value estimation can be produced. 

“Initial indications from processed diluted stockpiled overburden are encouraging and demonstrate potential for a coarse diamond size distribution for the pipe, though this is based on the relatively small diamond parcel produced to date,” he added.

The overburden samples found 176 diamonds totalling 56.67 carats of diamond, giving an average stone size of 0.32 per carat, though nine stones weighed over one carat, with the largest diamonds being 4.28, 4.18, 2.76, 2.71 and 1.94 carats in size.

Approximately 23 per cent of the diamonds were of gem quality, although the parcel was not sufficiently large to provide a representative diamond valuation at this stage, Stellar said.

Droujba is the larger of Stellar’s two main prospects. Discovered in the 1960s by the Russians, it was only mined down to 20 metres as it was believed there was nothing below that depth.

"These are exceptional grades and we await some form of tonnage estimation for Dyke-1 and an indication of potential mining costs for this type of potential mining operation."

Meanwhile, Daniel Stewart maintained its 'buy' recommendation and targeted a price of 15 pence.

Bulk sampling has already yielded 926 carats for undiluted grade of 115 carats per hundred tonnes (cpht), with potential in-situ kimberlite value estimated at up to $220 per tonne.

Stellar’s chief executive Karl Smithson says that with the recent appointment of CAE Mining as mining consultant, and now the commencement of drilling, the company remains on track to establish a maiden resource for the Tongo Dyke project in the first quarter of 2012.

Smithson adds that the Tongo bulk sampling grades “continue to prove encouraging”, with the kimberlite yielding an average grade to date of 115cpht. A further diamond parcel of approximately 300 carats will be exported in the near future to combine with the parcel of 639cts already in Antwerp which was recently valued at $191 per carat.

The company recently signed up E-Global Drilling to undertake the 6,000m core drilling at Tongo, with an option to extend the meterage if necessary. This first phase of drilling will be focussed on the 2.5km strike length of Tongo Dyke 1 in order to establish lateral and depth continuity of the kimberlite ore body at every 100m along strike.

Holes are being planned to intersect the kimberlite at depths of 50m, 100m and 200m from surface, with some holes targeting intersections at 300m vertical depth.

In addition, the 1km long Tongo Dyke 4, located 1km to the north of Dyke 1 will also be drilled as part of the programme. Previous mini-bulk sampling of Dyke 4 undertaken by Stellar returned grades of 100cpht.

CAE Mining are overseeing the resource drilling and bulk sampling programmes as part of their mandate to independently establish a maiden inferred resource estimate for the Tongo project.

In all, Stellar owns a 100% interest in four high-grade kimberlite projects in Guinea and Sierra Leone.

In Guinea resource definition drilling is continuing on the diamondiferous Droujba kimberlite pipe and a processing plant is being established on site to process bulk samples.

Smithson says: “We remain confident about the potential the Tongo kimberlite project offers and we look forward to updating the market on the progress we make as we work to establish a maiden resource base at both our Tongo and Droujba projects."