Stellar Diamonds narrows loss as it focuses on Tongo-Tonguma

The AIM-traded firm said the project carried a “robust” attributable post-tax net present value and internal rate of return of $104m and 31% respectively, with the estimated attributable net present value in excess of 40 times the current market capitalisation of Stellar.

It said estimated projected life of mine revenues were $1.518bn.

The company claimed there was a “significant” 4.5 million carats resource over the Tongo-Tonguma project with a target of an additional 8 million carats, and confirmed the resource statements, mine plan and financial model were completed by “independent consultants”.

On the financial front, Stellar’s $0.6m interim loan was repaid and replaced by a $1.24m convertible loan.

An additional $0.66m was raised post period-end through a placing, subscription and open offer.

The board continued to reduce its administration costs to $0.55m for the six months.

Stellar Diamonds reported a loss before tax for the period, off nil revenue, of $0.66m, narrowing from $0.89m year-on-year.

“With the significant potential of the amalgamation of the Tongo Diamond fields projects in mind, we entered into heads of terms with Octea Mining during the period to combine its adjacent Tonguma project with our own Tongo project in eastern Sierra Leone for commercial exploitation,” said chief executive Karl Smithson.

“The terms of the transaction with Octea began to change towards the end of the year from a planned acquisition of Tonguma to a proposed tribute mining arrangement, whereby Stellar intends to fund the mine development and pay Octea a 10% revenue share of all production from both licences once has recouped our capital expenditure in respect of the mine build.”

Smithson said a new heads of heads of terms for the proposed tribute mining agreement was entered into and announced on 20 February, with full, legally binding conditional agreements between Stellar and Octea currently being drafted and expected to be finalised in the near future.

“Independent consultants completed a detailed mine plan and financial model for the combined 4.5 million carat resource at Tongo-Tonguma which demonstrates that over an estimated initial mine life of 21 years some 3.9 million carats is expected to be produced.

“The recovered diamond grades and values of the three kimberlite dykes currently in the mine plan range from 100cpht to 260cpht and $209/ct to $310/ct.”

By worldwide standards, Smithson said those were considered to be some of the highest dollar per tonne kimberlite diamond deposits.

“Separately at the company's Baoulé kimberlite pipe project in Guinea, trial mining of the targeted 100,000 tonnes was completed just prior to the year end in June 2016.

“A total of 11,564 carats were mined with diamond sales totalling $1.1m over the trial mining period.”

As the project then stood down for the rainy season, Smithson said Stellar negotiated a joint venture over Baoulé and the two exploration licences in Liberia with a Dubai-based group, Citigate, which were signed in October 2016.

“However, to date no funding has been forthcoming from Citigate.

“Accordingly, we are now considering our options, for the continual development of Baoulé and exploration in Liberia whilst we focus on the Tongo-Tonguma project in Sierra Leone.”