June 25th

Archangel Diamond Corporation closes private placement offering of Subscription Receipts for gross proceeds, upon release from escrow, of US$172.4 million

/NOT FOR RELEASE IN THE UNITED STATES/

Archangel Diamond Corporation (\"Archangel\" or the \"Corporation\") (TSXV: AAD) is pleased to announce that it has closed the private placement offering (the \"Offering\") of subscription receipts (the \"Subscription Receipts\") described in the Corporation\'s news release issued on 3 June 2008. Archangel has issued 137,920,000 Subscription Receipts at a subscription price of US$1.25 per Subscription Receipt for gross proceeds of US$172,400,000. The proceeds of the Offering will be used, upon satisfaction of the escrow release conditions described below, to fund: (i) the initial payment obligation with respect to Archangel\'s proposed acquisition (the \"Transaction\") from OAO LUKOIL (\"LUKOIL\") of shares in OAO Arkhangelskoe Geologodobychnoe Predpriyatie (\"AGD\"), the holder of the licence to explore and mine the Verkhotina licence area, pursuant to a share purchase agreement (the \"Share Purchase Agreement\") dated 15 April 2008; (ii) other settlement costs and transaction costs; (iii) project development costs; (iv) repayment of the Cencan S.A. (\"Cencan\", a wholly-owned subsidiary of De Beers Soci�t� Anonyme (\"De Beers\")) working capital loan; (v) repayment of the De Beers standby term loan facility (if required); and (vi) for general corporate purposes. Details of the Transaction were previously disclosed in the Corporation\'s news release issued on 16 April 2008.

The gross proceeds of the Offering have been placed in escrow with Computershare Trust Company of Canada and will be released to Archangel, net of Offering expenses, upon satisfaction of certain escrow release conditions, including: (i) the fulfilment, satisfaction or performance of each of the conditions precedent to the completion of the Transaction without waiver of any condition by any party thereto; (ii) no termination event having occurred, as defined in the Share Purchase Agreement; (iii) other than certain permitted amendments, the Share Purchase Agreement and the Resolution Agreement shall not have been amended since the date of their execution; and (iv) no order, judgement, rule, law, statute or regulation shall be in force or otherwise have effect or have come in to force or otherwise have effect which would prevent the completion of the transactions and agreements contemplated by the Share Purchase Agreement, the Resolution Agreement and the Project Agreement.

The escrow release conditions also include a condition that, if required by the rules of the TSX Venture Exchange or applicable Canadian securities laws, the Corporation shall have received all necessary shareholder approvals and valuations or otherwise had the benefit of or obtained a waiver, permission or exemption there from with respect to: (i) the Offering and the issuance of the Subscription Receipts and underlying securities; (ii) any repayment of debt by the Corporation to a related party as that term is defined under Multilateral Instrument 61-101 - Protection of Minority Security Holders In Special Transactions, (referred to herein as \"MI 61-101\"); (iii) the completion of the Transaction; and (iv) any other \"related party transaction\" as that term is defined under MI 61-101 involving the Corporation in connection with the Transaction and the Offering.

Upon satisfaction of the escrow release conditions, each Subscription Receipt will be automatically exchanged, without payment of any additional consideration, for one unit of Archangel (each a \"Unit\"). Each Unit is comprised of one common share of Archangel (the \"Common Shares\") and one-half of one common share purchase warrant (each whole warrant, a \"Warrant\"). Each Warrant will entitle the holder thereof to purchase one additional common share of Archangel (each a \"Warrant Share\") at a price of C$1.50 per Warrant Share at any time prior to the day that is two years from the date of the release of the escrowed funds to the Corporation.

In the event that the escrow release conditions have not been satisfied on or before 17 October 2008, the escrowed funds (plus any accrued interest earned thereon) will be returned pro rata to each holder of the Subscription Receipts, and the Subscription Receipts held by such holder will be cancelled.

Archangel has agreed to pay to Canaccord Capital Corporation and RBC Capital Markets (jointly, the \"Agents\"), upon release of the escrowed funds to Archangel, a cash commission in the amount of 5.0% of the gross proceeds raised from the Offering other than from subscriptions to the Offering by Cencan and Firebird Global Master Fund Limited and its affiliates (\"Firebird\"), and 3.0% of the gross proceeds raised from subscriptions to the Offering by Firebird. No commission will be payable with respect to that portion of the Offering taken-up by Cencan.

In accordance with the policies of the TSX Venture Exchange and applicable securities laws, the Subscription Receipts, Common Shares, Warrants and Warrant Shares will be subject to a hold period expiring on 25 October 2008. The officers and directors of the Corporation, together with Cencan, have also entered into a lock-up agreement in favour of the Agents with respect to any shares of the Corporation held by such parties for a period of 120 days from the closing date of the Offering.

Purpose and Effect of the Offering

As stated above, the proceeds of the Offering are intended to finance certain obligations related to the Transaction, repay existing loans and provide the Corporation with working capital for general corporate purposes. The Transaction contemplated by the Share Purchase Agreement will, if completed, settle the claims pursued by Archangel as part of the Stockholm commercial arbitration against AGD and in the lawsuit in the Denver District Court, State of Colorado, USA against LUKOIL. More importantly, it will provide the Corporation with an opportunity to move forward as an operating entity, as opposed to an entity whose principal asset is the subject of litigation, with an interest in a property of merit and with adequate funding to pursue its business over the short to medium term.

The following table summarizes the anticipated dilution upon satisfaction of the escrow release conditions and exercise of the Subscription Receipts:

    
    -------------------------------------------------------------------------
                                                                  Assuming
                                                                  Exercise
                                                      As at        of the
                                                     June 23,   Subscription
    Security                                          2008        Receipts
    -------------------------------------------------------------------------
    Class and series of voting or equity
     securities for which there are securities
     outstanding:
      Common Shares                                 85,010,327   222,930,327
    -------------------------------------------------------------------------
    Class and series of securities for which there
     are securities outstanding if the securities
     are convertible into, or exercisable or
     exchangeable for, voting or equity securities
      Stock Options                                   N/A(1)        N/A(1)
      Warrants                                         N/A        68,960,000
      Convertible Debentures                           N/A           N/A
    -------------------------------------------------------------------------
    Class and series of voting or equity
     securities that are issuable on the
     conversion, exercise or exchange of
     outstanding securities above
      Common Shares                                    N/A        68,960,000
    -------------------------------------------------------------------------
    Fully Diluted Share Capital                     85,010,327   291,890,327
    -------------------------------------------------------------------------
    Notes:
    (1) The Corporation currently has no common shares reserved for issuance
        pursuant to an Incentive Stock Option Plan or outstanding stock
        options. Such to an Incentive Stock Option Plan may be adopted in the
        future.
    

Interest of Certain Parties

In order to facilitate the Offering and Transaction Cencan agreed to subscribe for Subscription Receipts of the Offering representing a minimum of 58% of the Offering and, in the event that the aggregate amount of the Offering was less than US$200 million, up to a maximum amount of US$116 million in Subscription Receipts, all on terms reasonably acceptable to the Agents.

Cencan, which owned approximately 58% of the issued common shares of Archangel prior to the closing of the Offering, has acquired 92,800,000 Subscription Receipts for a total amount of US$116 million which, on a fully diluted basis, results in its post closing ownership interest in Archangel increasing to approximately 65%. Firebird, which owned approximately 19% of the issued common shares of Archangel prior to the closing of the Offering, has acquired 24,000,000 Subscription Receipts for a total amount of US$30 million which, on a fully diluted basis, results in its post closing ownership interest in Archangel decreasing to approximately 18%.

Participation by Cencan and Firebird in the Offering constitutes a related party transaction pursuant to MI 61-101 and TSX Venture Exchange Policy 5.9 (the \"Related Party Transactions\").

Approval Process

The Board of Archangel formed an independent committee comprised of two directors each of whom is unrelated to Cencan or Firebird and is otherwise independent as determined pursuant to Part 7 of MI 61-101 (the \"Independent Committee\"). The mandate of the Independent Committee included reviewing the proposed terms of any financing involving the participation of related parties, reviewing the fairness of any proposed related party transaction, and conducting such investigations and considering such matters concerning the foregoing as the Independent Committee deemed necessary or advisable. The Independent Committee retained its own legal counsel.

In its consideration of the Offering, the Independent Committee reviewed the Corporation\'s most recent financial statements, considered the Corporation\'s current financial position as advised by the Chief Financial Officer of the Corporation and considered an advisory letter addressed to the Independent Committee from the Corporation\'s auditors with respect to common benchmarks typically considered when assessing the financial health of a company.

As at May 31, the Corporation\'s total creditor balance was estimated to be $4,390,141 or higher. The Corporation had a cash balance of $1,774,838 and $950,000 was still available under the unsecured loan facility of US$4.5 million made available to the Corporation by Cencan in December 2007 ($3,550,000 of this facility having already been drawn down). The Corporation therefore had a net working capital deficiency of $2,615,303 and was not able to meet its current liabilities.

In light of the financial situation of the Corporation and the opportunity afforded to the Corporation by virtue of the Transaction, the Independent Committee believed that the Corporation was in serious financial difficulty, and that the Transaction and the Offering could improve the Corporation\'s financial position in order that it may continue as a going concern by securing an interest in the Corporation\'s sole material asset, retiring existing loans and providing working capital. The Independent Committee also believed that the terms of the Offering, including the participation of Cencan in the Offering, were reasonable in the circumstances of the Corporation, and that completion of the Offering was in the best interests of the Corporation. The Independent Committee therefore recommended to the Board of Directors that the Corporation proceed with the Offering, including the participation of Cencan in the Offering.

The full Board of Directors of the Corporation then considered the Offering, the status of the Corporation and the recommendation of the Independent Committee and resolved unanimously that the Corporation was in serious financial difficulty; that the Offering was designed to improve the Corporation\'s financial position and otherwise is in the best interests of the Corporation. The Board of Directors further unanimously resolved that the proposed Offering and the terms thereof were reasonable in the circumstances of the Corporation and, subject to the acceptance of the TSX Venture Exchange, the Offering was authorized and approved.

The subscription received from Cencan was subsequently considered by the Board and approved with those directors affiliated with De Beers abstaining. All terms and conditions related to the Cencan subscription are on the same terms as those applicable to subscribers introduced to the Corporation by the Agents.

Exemptions from Minority Approval Requirements of MI 61-101

The Related Party Transactions are exempt from the requirement to obtain an independent valuation pursuant to Section 5.5(b) of MI 61-101 as Archangel is listed only on the TSX Venture Exchange. In consideration of the financial circumstances of the Corporation and in light of the determinations of the Board of Directors, the Corporation has relied upon the prescribed exemption from the requirement to obtain minority shareholder approval pursuant to the financial hardship exemption in Section 5.7(e) of MI 61-101.

In light of uncertain market conditions, advice received from the Agents, and as the proceeds of the Offering were to be held in escrow pending satisfaction of escrow release conditions; it was determined that if the Corporation received confirmed subscriptions in excess of US$170 million it was in the best interest of the Corporation to close the Offering at the earliest possible opportunity and hold the funds in escrow.

While the Corporation intends to diligently pursue the satisfaction of the condition precedents set out in the Share Purchase Agreement, and seek to meet the escrow release conditions of the Offering as soon as possible, it is not anticipated that such conditions precedent, and therefore the escrow release conditions, will be satisfied within the next 21 days.

The Subscription Receipts, the Common Shares and the common shares issuable upon exercise of the Warrants have not been registered under the United States Securities Act of 1933 (the \"Act\") and may not be offered or sold absent registration under the Act or an applicable exemption from the registration requirements thereof. This news release does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction or an exemption therefrom.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

CAUTIONARY NOTE TO SHAREHOLDERS CONCERNING FORWARD LOOKING STATEMENTS AND FINANCIAL PROJECTIONS - This news release contains \"forward-looking statements\", within the meaning of applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the outcome of future negotiations, completion of the offerings and share purchase transactions, execution of definitive agreements, success of financing activities, government regulation, receipt of regulatory approvals, and participation of certain parties in the offerings. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as \"plans\", \"expects\" or \"does not expect\", \"is expected\", \"budget\", \"scheduled\", \"estimates\", \"forecasts\", \"intends\", \"anticipates\" or \"does not anticipate\", or \"believes\", or variations of such words and phrases or state that certain actions, events or results \"may\", \"could\", \"would\", \"might\" or \"will be taken\", \"occur\" or \"be achieved\". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual outcomes, results, level of activity, performance or achievements of Archangel to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks described in the above news release; those risks set out in Archangel\'s disclosure documents and its annual, interim management discussion and analysis and annual report; and the failure to obtain necessary consents and approvals to complete the offerings. Although Archangel has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Archangel does not undertake to update any forward-looking statements or financial projections, except in accordance with applicable securities laws.

THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

SOURCE: Archangel Diamond Corporation Ms. Jocelyn Fraser, Archangel - Investor Relations, Vancouver, British Columbia, Canada, Tel: (604) 731-6164, This email address is being protected from spambots. You need JavaScript enabled to view it.