Archangel Diamond Corporation Initiates Resolution Of Verkhotina Licence Transfer.

DENVER--(BUSINESS WIRE)--July 7, 1998--Archangel Diamond(VSE:AAD.) Archangel Diamond Corporation (the "Corporation") (VSE: AAD) announced today that it has formally notified its Russian partner, Arkhangelskgeoldobycha ("AGD") that a dispute exists under the terms of the current agreements and that the Corporation is commencing the process leading towards international arbitration proceedings. The Corporation is seeking immediate transfer of the Verkhotina mining and exploration license (the "License") as required under the terms of its agreement dated 24th November 1993 ("the Diamond Venture Agreement") as amended by Memorandum dated 25th February 1994 (the "Memorandum"). The Corporation is also opposing any attempt of AGD to transfer its shares in AB until after the License has been transferred to AB.

AB was formed in 1994 and its ordinary shares are owned 50 percent by AGD, 40 percent by the Corporation and 10 percent by IBME. AB was formed among other things, to hold the Verkhotina license. On its formation AB entered into an agreement of cooperation (the "Cooperation Agreement") with the corporations AGD and IBME whereby AB agreed to perform certain functions under the Verkhotina Diamond Venture Agreement. On April 22, 1997, the AGD Board of Directors resolved that the transfer of the Verkhotina license from AGD to AB would occur upon the completion of the agreed work program for calendar 1997 and the first quarter of 1998. Such work program has been completed and the Corporation received from AGD a letter stipulating that all conditions requisite to the transfer of the Verkhotina license had been satisfied.

The Corporation has informed AGD that no further funding of the Verkhotina work programs will take place until the Verkhotina license has been transferred from AGD to AB. In May this year, the Corporation, AGD, and AB all agreed to a comprehensive field program on the Grib Pipe through the first quarter of 1999. The program, which is estimated to cost US$8 million and comprises bulk sampling (sufficient to recover a minimum of 1000 carats of diamonds), angle hole geotechnical drilling and construction of a dedicated sample processing plant, has temporarily been put on hold.

Timothy Haddon, President and Chief Executive Officer of the Corporation said "I believe this action is in the best interest of our shareholders and over the next 30 days we and our legal advisors will be trying to convince AGD to initiate the license transfer. In the event we are not successful, we will commence arbitration proceedings in Stockholm".

Archangel Diamond Corporation is an international diamond exploration Company currently earning a 40 percent interest in the Verkhotina license area in the Province of Arkhangel'sk in northwestern Russia. De Beers Consolidated Mines Ltd. has recently stated in a technical assessment report on behalf of Task Holdings Limited, that the "Grib Pipe" has an estimated resource of 73 million tons of kimberlite to a depth of 500 meters: containing 51 million carats of plus 1mm diamonds, at an average grade of 70 carats per hundred tons, with a value of US$72 per carat.

On behalf of Archangel Diamond Corporation, Tim Haddon, CEO, President and Director

The Vancouver Stock Exchange has neither approved nor disapproved of the contents of this news release.

    CONTACT:  Archangel Diamond Corporation
               John R. Haigh, 303/ 292-1299