Stellar Diamonds plc
(“Stellar” or the “Company”)
ACQUISITION OF KONO DIAMOND PROJECT, SIERRA LEONE
Stellar, the London listed (AIM:STEL) diamond mining and exploration company focused on West Africa, is pleased to announce that it has reached agreement with Petra Diamonds Limited (“Petra”) to acquire Petra’s interest in the Kono kimberlite project (“Kono Project”) in Sierra Leone, the remaining interest in which is held by Stellar’s wholly owned subsidiary, Stellar Diamonds Limited.
Highlights
- Acquisition of Petra’s interest in Kono for an all share consideration of £900,000
- Consideration to be settled by the issue to Petra of 4,500,000 Stellar ordinary shares
- Petra to become a 4.45% shareholder in Stellar
- Stellar and Petra to enter into a cooperation agreement
- Kono trial mining produced over 4,200 carats in 2008/9
- Kono Project presently on care and maintenance
- Kono Project economics improving in line with rough diamond prices
Karl Smithson, Chief Executive of Stellar, comments:
“This deal is excellent for Stellar shareholders as we gain full control of the Kono asset, which we consider has the potential to become a long-term mine for the Company. This is in line with our growth strategy focused on the development of our kimberlite projects in West Africa.
“The Kono Project is among the most advanced in our portfolio with over US$17 million spent to date on the establishment of underground shaft and tunnel infrastructure, a 75 tonne per hour processing plant, earth moving machinery and on general exploration. The project has been on care and maintenance since May 2009, after the global fall in diamond prices. However, with the strong recovery in rough diamond prices, the Kono Project is an exceptionally well positioned development asset for Stellar to hold in its portfolio, offering growth to our future production pipeline.
“We also welcome Petra as a significant shareholder in Stellar and are pleased to reinforce our existing excellent relationship. The cooperation agreement that Stellar and Petra have agreed offers optionality to both parties, and we look forward to discussing partnerships on other Stellar projects in West Africa with Petra as and when appropriate opportunities arise.”
Terms of Acquisition
Stellar will issue Petra with 4,500,000 new ordinary Stellar shares (at a price of £0.20 per share) for a total consideration of £900,000, in return for Petra’s interest in the Kono Project, held via joint venture company Basama Diamonds Limited. Following the acquisition of Petra’s interest, the Stellar group will increase its ownership in the Kono project to 100%.
The completion of the transaction is subject, inter alia, to the execution of a share purchase agreement and issue of the Stellar shares to Petra. On completion, Stellar’s issued share capital will be 101,193,932 shares and Petra will become a 4.45% shareholder in Stellar. Petra has agreed (subject to certain exceptions) not to dispose of any of the Stellar shares for 12 months from the date of the signature of the share purchase agreement, which is expected to be before 14 May 2010.
Cooperation Agreement between Stellar and Petra
As part of the transaction both Stellar and Petra have agreed a cooperation agreement whereby Stellar will in good faith discuss with Petra the first option to joint venture any project in the Stellar portfolio which Stellar seeks to develop with a partner.
About the Kono Kimberlite Dyke Project
The Kono project is an underground trial mining operation targeting diamond bearing kimberlite dykes within two Exclusive Prospecting Licences covering an area of 206km2 in the heart of the Kono diamond district of eastern Sierra Leone.
The Kono district has historically produced a reported 9 million carats of high value gem diamonds, mostly by artisanal means, including the 970 carat Star of Sierra Leone. The Kono licence areas are directly adjacent to the Koidu Mine owned by Koidu Holdings, which hosts the largest established hard-rock diamond resource in Sierra Leone, with 2 million carats in the indicated and inferred category. The most recent public data on production by Koidu Holdings shows that Pipe 1 grades at 45 carats per hundred tonnes (“cpht”) with a diamond value of US$231 per carat, whereas Pipe 2 grades at 26cpht with a diamond value of US$187 per carat.
During the successful joint venture, Petra and Stellar mapped some 17km of kimberlite dykes in the project area. A number of shafts were sunk to evaluate some of these kimberlites, with underground development focusing on two kimberlite dykes, designated Pol-K and Bardu. Over 4,200 carats of diamonds were produced by the joint venture during this phase of development work. The project was put on care and maintenance in 2009 after the global fall in diamond prices.
At Pol-K, the shaft is currently at a depth of 85m and trial stope mining has been conducted at a depth of between 35m and 65m. In-situ grades of around 65cpht have been consistently generated, with an average diluted “run of mine” grade of 38cpht. The three largest diamonds produced from Pol-K weigh 11.95, 11.45 and 10.55 carats.
At Bardu the shaft is currently at 45m depth and lateral development drives in the kimberlite have generated average in-situ grades of 66cpht, However the grade increased to 140cpht in the western most end of the development drive, which could be indicative of the commencement of a higher grade kimberlite zone. No trial stope mining has been conducted on Bardu to date.
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