Re Agreement with World's Largest Resources Com...

SouthernEra Diamonds Inc. - Alliance with World's Largest Resources

    Company

 

    -  BHP Billiton to become SouthernEra's largest shareholder

    -  Subject to regulatory approval, BHP Billiton agrees to a private

       placement with gross proceeds of US$8,000,000

    Shares Issued and Outstanding: 112,279,101

    TSX: SDM

    AIM: SRE

 

    TORONTO and LONDON, UK, Oct. 19 /CNW/ - SouthernEra Diamonds Inc. (TSX:

SDM; AIM: SRE) announced today that BHP Billiton has agreed to complete a

private placement with SouthernEra, at a premium to the prevailing market

price. Part of the funds will be directed towards exploration, evaluation and

potentially the development of SouthernEra's diamond properties in the

Democratic Republic of the Congo (DRC).

    BHP Billiton will purchase approximately 15,636,000 shares of SouthernEra

at C$0.60 for gross proceeds of US$8,000,000, becoming SouthernEra's largest

shareholder with an approximate 12% holding. The placement is subject to

regulatory and stock exchange approval.

    An agreement has been concluded between the companies to explore for

primary diamond deposits and all other minerals within SouthernEra's DRC

exploration permits, covering in excess of 13,000 square kilometres. The

permits have been grouped into six distinct geographic permit areas.

SouthernEra will retain a 100% interest in all known or discovered alluvial

diamond deposits within these permit areas.

    SouthernEra will initially be project manager for all six permit areas

and BHP Billiton can earn a 25% interest in a specific permit area and become

project manager by completing a 300 tonne bulk sample on any kimberlite

discovery. An additional 25% interest in that individual permit area may be

earned by the completion of a pre-feasibility study and a further 15% by fully

funding a bankable feasibility study. A bankable (full) feasibility study is a

comprehensive analysis of the economics of a project (+/- 15% precision) and

is used in the banking industry for financing purposes.

    US$4,000,000 of the US$8,000,000 proceeds from the private placement will

be used to fund the DRC exploration joint venture program and once fully

utilised, BHPB will fully fund exploration up to and including the completion

of a pre-feasibility study. The remaining US$4,000,000 will be used by

SouthernEra to support its global exploration, development program and general

corporate purposes.

    SouthernEra's President and CEO Alasdair MacPhee said: "We are very

pleased to have gained the support of BHP Billiton, the world's largest

resource company, and look forward to building a long-standing relationship

with a company of BHPB's calibre and mine discovery track record. It also

provides a strong endorsement of the potential of the permits we have under

our control in the DRC. This association will enable us to more rapidly

advance the kimberlite program in the DRC and the private placement will

strengthen SouthernEra's diamond discovery and development strategy going

forward".

    The majority of SouthernEra's permits in the DRC lie within what is

considered a 'kimberlite emplacement corridor', underlain by basement Archaean

granite-gneiss of the Congo Craton, which extends from the DRC into the world

renowned diamond producing Lunda Norte Province in neighboring Angola. In 

mid-October, 2004, SouthernEra completed over 43,000 line-kilometers of

airborne magnetic and radiometric geophysical surveys. The surveys focused on

selected permit areas in the diamond-rich Kasai-Oriental Province which has

produced two of the 'top-ten' largest gem quality diamonds in the world and

produces in excess of 20 million carats of diamonds annually.

    SouthernEra's first phase regional stream sampling and soil sample 

follow-up of selected aeromagnetic survey targets during 2005 has produced

positive kimberlitic indicator mineral results as well as the recovery of

diamonds in some of the samples. An exploration program agreed to by both

partners will commence immediately.

    SouthernEra Diamonds is one of Canada's largest fully integrated diamond

companies with extensive diamond exploration in six countries including

Canada, Gabon, the DRC, Zimbabwe and South Africa. The Company maintains an

18 percent free-carried interest in the Camafuca Diamond Project in Angola and

also operates the Klipspringer Diamond Mine in South Africa.

   

    For further information: Toronto: SouthernEra Diamonds Inc.:

Mr. Alasdair MacPhee, President and CEO Or Mr. Howard Bird, Senior Vice

President, Global Exploration, Telephone: [phone], Fax: [phone],

E-mail: inbox(at)southernera.com, www.southernera.com; London: 4C-Burvale,

Carina Corbett, Director, Telephone: ++ 44 (0) 207-907-4761, Fax:

++ 44 (0) 207-907-4769, Email: corbett(at)4cburvale.co.uk

    (SRE SDM.)