Mountain Province Diamonds Announces Proposed $47 million Rights Offering

Shares Issued and Outstanding: 80,715,558
TSX: MPV
NYSE MKT: MDM

TORONTO and NEW YORK, Oct. 10, 2012 /CNW/ - Mountain Province Diamonds Inc. ("Mountain Province", the "Company") (TSX: MPV) (NYSE MKT: MDM) today announced that the Company has filed a rights offering circular (the "Rights Offering Circular") with the Toronto Stock Exchange (the "TSX") and the securities regulators in each of the provinces of Canada (with the exception of Quebec) in respect of a rights offering to raise gross proceeds of approximately $47.1 million (the "Offering"), which will be used to fund the Company's 49% share of the initial capital costs for the Gahcho Kué diamond mine, a joint venture with De Beers Canada Inc. (51%), and for general corporate purposes.  Proceeds from the Offering are expected to be sufficient to cover the Company's share of the initial capital costs through to the completion of permitting of Gahcho Kué in 2013.

Under the Offering, each registered holder of common shares of the Company (the "Shares") as of a record date to be determined in conjunction with the TSX will receive one right (a "Right") for each Share held. Six (6) Rights plus the sum of $3.50 (the "Subscription Price") are required to subscribe for one Share (the "Basic Subscription Privilege"). The Rights will expire on a date to be announced (the "Expiry Date"), after which unexercised Rights will be void and without value. The Rights will be listed on the TSX. Shareholders who fully exercise their Rights may subscribe pro-rata for any additional Shares not otherwise subscribed for before the Expiry Date (the "Additional Subscription Privilege").

Bottin (International) Investments Ltd. (controlled by Dermot Desmond) ("Bottin"), currently Mountain Province's largest shareholder, has advised the Company that it intends to fully exercise its Rights under the proposed offering. In addition, the Company is in discussions with Bottin to provide a stand-by commitment to subscribe for those Rights Shares not otherwise subscribed for on the exercise of Rights subject to regulatory approval of the terms of a proposed stand-by agreement with the Company.

Patrick Evans, Mountain Province President and CEO, commented: "We have received wide support for a broad placement of common shares. However, given that the Company's shares are currently trading below the $5 level of the last placement completed in October 2010, the Board considers a rights offering to be fairer and in the best interest of current shareholders."

Mr. Evans added: "While Mountain Province's share price has strongly outperformed its peers, we believe that the current share price does not adequately reflect the exceptional progress recently achieved with the permitting and development of Gahcho Kué, the world's largest and richest new diamond mine development. Under the circumstances, current shareholders - most of whom are longstanding shareholders - should be given the first opportunity to increase their investment."

The Offering is subject to regulatory approval, including that of the TSX.  The TSX has conditionally approved the listing and posting for trading of the Rights and the common shares of the Company underlying the Rights, subject to the satisfaction of certain listing requirements.  The Offering will be made in all provinces of Canada (except in Québec), and in such other jurisdictions where the Company is eligible to make such an offering. More details concerning the Offering and the procedures to be followed by holders of Shares will be contained in the Rights Offering Circular to be mailed to holders of Shares.

To subscribe for Shares, a completed Rights certificate, together with payment in full of the Subscription Price for the Shares subscribed for, must be received by the subscription agent for the Offering, Computershare Investor Services Inc. (the "Subscription Agent"), before the Expiry Date.

The Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form F-7 covering the offering, and the distribution of Rights and commencement of the Offering will occur promptly following the effectiveness of that registration statement.

This news release is not an offer of securities for sale in the United States. The securities to be offered in the Offering described above may not be offered or sold in the United States absent registration under the U.S. Securities Act, or an exemption from registration. Public offerings of securities in the United States will be made by means of a prospectus that may be obtained from the Company that will contain detailed information about the Company and management, as well as financial statements.

Mountain Province Diamonds is a 49% participant with De Beers Canada in the Gahcho Kué JV located at Kennady Lake in Canada's Northwest Territories. The Gahcho Kué Project consists of a cluster of four diamondiferous kimberlites, three of which have a probable mineral reserve of 31.3 million tonnes grading 1.57 carats per tonne for total diamond content of 49 million carats.

Gahcho Kué is the world's largest and richest new diamond development project. A December 2010 feasibility study filed by Mountain Province (available on SEDAR) indicates that the Gahcho Kué project has an IRR of 33.9%.

Qualified Person
This news release has been prepared under the supervision of Carl G. Verley, P.Geo., who serves as the qualified person under National Instrument 43-101.

Forward-Looking Statements
This news release may contain forward-looking statements, within the meaning of the "safe-harbor" provision of the Private Securities Litigation Reform Act of 1995, regarding the Company's business or financial condition. Actual results could differ materially from those described in this news release as a result of numerous factors, some of which are outside the control of the Company.

SOURCE: Mountain Province Diamonds Inc.

Mountain Province Diamonds Inc.
Patrick Evans, President and CEO
161 Bay Street, Suite 2315
Toronto, Ontario M5J 2S1

Phone: [phone]

E-mail: [email protected]

www.mountainprovince.com