The aim is to generate early cash flow and plant commissioning is earmarked for the end of August this year.
Chief executive Karl Smithson said: "The diamondiferous Baoulé pipe is located in the heart of the Aredor diamond district of Guinea which has historically yielded very large, high value diamonds from alluvial mining.
"With an internal resource estimate of at least 3 million carats at the lower end of the grade scale of between 13- 40cpht we are excited to further unlock the value in this high tonnage project."
He added: "We have already made progress establishing the local infrastructure for the project and we are in the process of relocating our significant earth moving and kimberlite processing plant, already located in Guinea, to the Baoulé pipe."
Stellar noted that in 2000, a parcel of 509 carats, which did not contain any large stones, was sold for US$157 per carat but it believes the same parcel could achieve prices in excess of US$200 per carat in the current market.
Broker Sanlam, which rates the stock a 'hold', said the project could be potentially transformational for the company.
"The diamond value is believed to be $200/ct or above which seems reasonable given the historical prices achieved there," it highlighted.
"At 13cpht and $200/ct the Baoule rock would be worth in the region of $26/t against costs of production in the region of $20/t."
At 40cpht (carats per hundred tonnes) the rock is worth closer to $80/t which would deliver high margins and make Baoule an excellent project," it added.
"A grade of 30cpht or more should transform the fortunes of Stellar and its shareholders. Baolue has the potential to transform Stellar and make it a very interesting company indeed. We currently value Baoule at a nominal $5m which would clearly increase many times should trial mining be successful."
Stellar shares edged 1.85% higher to 1.375p.