New Kimberlite Discoveries at Catalao Diamond Project

TORONTO, Sept. 25, 2018 - Five Star Diamonds Ltd. (TSX-V:STAR) Five Star Diamonds Ltd. (“Five Star” or the “Company”) is pleased to announce very promising results from the ongoing diamond drilling programme at the Catalao project.

CATALAO DIAMOND PROJECT

The Catalao Diamond project is located in Goias State, Brazil and contains an indicated mineral resource of 517,000 tonnes grading 23.5 cpht and additional inferred mineral resources of 7.76 Mt grading 26.7 cpht, both estimated based on a US$ 200/ct average carat value. The actual project resources were distributed in three kimberlite pipes named CAT-01A, CAT-01B and CAT-01C (together “CATs-01ABC”). The indicated resources represent the upper oxide zone of the three pipes and the inferred resources are related to the fresh material (Catalão Diamond Project – NI 43-101 Technical Report dated 9 February 2017 and prepared by S.Hutchin).

As previously announced, the Company has acquired the majority of the equipment to commence mining at the oxide zone. A Dense Media Separator plant (“DMS plant”) and major equipment is already on site. The construction of the DMS plant is expected to take 6-8 months from receipt of final funding with production of the oxide material from CATs-01ABC to commence shortly thereafter. The decision to bring the Catalao mine in to production, specifically CATs-01ABC, is not based on a feasibility study establishing mineral reserves demonstrating economic and technical viability and thus may increase uncertainty and specific risks of failure associated with this production decision.

In early August 2018, Five Star started a diamond drilling programme to test new exploration targets which were selected based on the results of a detailed ground magnetic survey and a shallow auger drilling programme previously developed by the Company since exploration activities started in 2015.

From early August to date, the Company has concluded 14 exploration drill holes for a total of 948.65 linear-meters. All drill holes are using an HQ (63.5mm) diameter and have been drilled vertically or inclined at 60 degrees. The ongoing drilling programme is being conducted by a major Brazilian drilling company and Five Star has an additional budget to drill another 2,500 linear-meters this year.

The actual exploration drilling programme resulted in the discovery of three new kimberlite pipes, named CAT-11A, CAT-11B and CAT-01K.

CAT-11A and CAT-11B pipes are located approximately 1,000 to 1,100 meters southwest of CATs-01ABC and approximately 1,450 to 1,500 meters southwest of the planned site for the DMS plant [figure 01]. Both pipes are part of a group of 4 circular to sub-circular magnetic anomalies which are strongly controlled by a northwest-southeast major structure, similar to the structural control on CATs-01ABC pipes [figure 02].

Figure 01 – Location of the kimberlite pipes at the Catalao Diamond Project.
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The CAT-11A kimberlite pipe was discovered by drill hole CAT-DDH-18-033 which intersected 23.16 meters of a weathered kimberlitic rock located close to the surface. The interval is composed by a typical upper Yellow Ground¹ (orange saprolite of kimberlite) followed by a lower Blue Ground² (green saprolite of kimberlite). Both zones are highly magnetic and contain high chromium values. The weathered CAT-11A kimberlite pipe is covered by a high magnetic reddish brown soil horizon with a thickness of about 8 vertical meters.

The CAT-11B kimberlite pipe was discovered by drill hole CAT-DDH-18-034 which intersected 31.04 meters of a weathered kimberlitic rock close to surface. The drill interval is similar to the one obtained on CAT-11A pipe, starting with an upper orange saprolite (Yellow Ground) and changing to a lower dark green saprolite (Blue Ground). Also similar, the weathered kimberlitic material is highly magnetic and contains anomalous chromium values. The soil cover over this pipe is about 10 vertical meters.

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¹ Yellow Ground represent the upper portion of the weathering profile commonly developed on top of kimberlite pipes on tropical regions. This term is widely used in South Africa.
² Blue Ground represent the lower portion of the weathering profile commonly developed on top of kimberlite pipes on tropical regions. The Blue zone sits just on top of the fresh rock This term is widely used in South Africa.

Figure 02 – Magnetic response (Analytic Signal Image) over CAT-11 targets/pipes.
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The third discovery represents the CAT-01K pipe which is located 270 meters southeast of CATs-01ABC and 350 meters south of the planned site for the DMS plant [figure 01]. This pipe was intersected by drill hole CAT-DDH-18-023 which returned with an interval of 17.15 meters of weathered (saprolite) to semi-weathered (saprock) kimberlitic intrusion. The semi-weathered portion contains mantle and crustal xenoliths ranging from 1 to 8 centimeters in size [figure 03]. Kimberlite Indicator Minerals (“KIM”) such as garnet, Cr-diopside, Cr-spinnel are present together on the mantle xenoliths and as free crystals in the rock matrix. The whole intersection contains a high magnetic response.

Figure 03 – CAT-01K kimberlite. Hole CAT-DDH-18-023 (31.50m depth).
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In addition, ten (10) drill holes already concluded on other exploration targets have uncovered new kimberlite intersections with variable sizes ranging from 1.31 meters up to 13.50 meters. The company is reviewing these actual results and is considering making additional infill holes on some of these targets after the conclusion of the ongoing drill target testing phase.

“We are very excited with these new discoveries at Catalao which supports our belief that Catalao is a highly prospective diamond project with multiple kimberlites. This provides a positive backdrop as we look to complete our financing, commence construction and then start production at Catalao” said Matthew Wood, Chairman of Five Star Diamonds.

Next Steps

For the remainder of 2018, Five Star will continue to focus on further defining and expanding resources at Catalao. The diamond drilling programme will continue testing new potential exploration targets and delineating the size of the new discoveries.

The Company is also planning to split and use half-core from CAT-11A and CAT-11B pipes to be submitted for a caustic fusion, followed by a macro and micro diamond analysis. In addition, it is under consideration to conduct shallow excavations on CAT-11 pipes to collect bulk samples to be run on a pilot plant.

MARAVILHA DIAMOND PROJECT

The Maravilha Diamond project is located in Minas Gerais State, Brazil. In March 2018, Five Star announced the results of a bulk sampling program to test the M3 kimberlite pipe at the Maravilha Diamond Project. A total of 658 macro and microdiamonds were recovered.

Early in May, the Company initiated a preliminary diamond drilling programme to evaluate the shape of the M3 kimberlite, as well as, to acquire enough core material for further caustic fusion and a micro-macro diamond analysis.

Figure 04 – Diamond drilling at the Maravilha Diamond Project.
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The diamond drilling programme was concluded on July 20, 2018 and included the completion of 9 (nine) drill holes for a total of 736,33 meters drilled and distributed on 4 (four) drill section approximately 40 meters apart. As a result of the drilling programme, 7 (seven) drill holes intersected the M3 kimberlite pipe with widths ranging from 0.3 meters up to 20.18 meters. In total, 77.00 linear-meters of kimberlitic material is available for further analysis.

Table 01 – Kimberlite drilling intervals on M3 kimberlite intrusion.

The M3 kimberlite is a tabular body extending lateraly on a northeast-southwest direction and hosted on a biotite granite intrusion. Ramifications such as dyke-like structures filled by kimberlitic material are present on the northeastern sector of the main M3 body, suggesting a complex intrusion system.

Figure 05 – Drill intersection on M3 kimberlite intrusion.
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At least, two different fácies have been recognised and described as Tufisitic Kimberlite (“TK”) which is locally brecciated (“TKB”) and an Hypabissal Kimberlite (“HK”). A transition zone between TK and HK was also present in some intersection.

Figure 06 – Drill core from M3 kimberlite intrusion.
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ABOUT FIVE STAR DIAMONDS

Five Star Diamonds is listed on the TSX Venture Exchange under the ticker symbol STAR. The Company controls a dominant and highly enviable position in the Brazilian kimberlite diamond sector owning 23 diamond projects comprising an aggregate of 41 exploration licences and applications across 76,426 hectares. To date, the Company has conducted exploration programs on seven projects with the Catalao, Verissimo, Riachao, Jaibaras and Maravilha Projects proven to contain diamond bearing kimberlites. Five Star Diamonds is focused on acquiring and developing advanced staged diamond projects in Brazil. Since it was established, it has pursued an accelerated growth strategy and aims to be one of the first producers of diamonds from kimberlite deposits in Brazil. The Company is focused on the development of sustainable kimberlite pipes and is not involved in alluvial diamond mining with its associated environmental issues. The Company works closely with local, state and federal authorities in Brazil to foster an open, transparent and legal diamond industry in Brazil. This release is an update by the Company on its 100% owned Catalao and Maravilha Diamond Project. It is expected that the company will be able to provide further updates on this and its other Projects over the coming months and we look forward to keeping shareholders informed of our progress as we move towards building a truly unique Brazilian Diamond Company.

Qualified Person
Mr. Paulo Ilídio de Brito, BSc Geology

Mr. Paulo de Brito is a geologist based in Brazil, has over 30 years of experience in the mining industry, dealing primarily with gold, copper, nickel, iron, industrial minerals and more recently diamonds. Mr. Brito is a Principal of consulting group Brasgeo and was until recently Exploration Manager of Paringa Resources Limited. Previously, he worked as a senior geologist with WMC Resources Ltd. for 18 years until the closure of their activities in Brazil in 2002.
The exploration activities and their related results included in this announcement were directly supervised and managed by Mr. Brito. According to Mr. Brito, all exploration work carried out to date on the Projects mentioned in this release follow clear mining industry standards.

Mr. Brito, is a member of AIG (Australian Institute of Geoscientists), a professional geologist of CREA-RJ (Conselho Regional de Engenharia e Agronomia do Estado do Rio de Janeiro) and a Qualified Person as defined in National Instrument 43-101. Mr. Brito reviewed and approved the scientific and technical information contained in this press release.

On behalf of the Board

Five Star Diamonds Limited

Matthew Wood
Chairman of the Board

For further information, please contact:

Five Star Diamonds Limited

Rajan “Raj” Rai

rrai@fivestardiamonds.net
+1 778 835 9200

Cautionary Note Regarding Forward-looking statements

Information set forth in this news release contains forward-looking statements. Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking statements as a result of various factors, many of which are beyond the Company’s control. Such factors include, among other things: variations in the nature, quality and quantity of any mineral deposits that may be located, significant downward variations in the market price of any minerals produced, the Company’s inability to obtain any necessary permits, consents or authorizations required for its activities, to produce minerals from its properties successfully or profitably, to continue its projected growth, to raise the necessary capital or to be fully able to implement its business strategies. A mine production decision that is not based on a feasibility study demonstrating economic and technical viability does not provide adequate disclosure of the increased uncertainty and specific risks of failure associated with such a production decision.
Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. Except as required under applicable securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking information.

NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.