9 Dec 2013 07:00
NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION TO US NEWS WIRE SERVICES.
9 December 2013
AIM: STEL
Stellar Diamonds plc
("Stellar" or the "Company")
Joint Venture on Baoulé Diamond Pipe in Aredor District of Guinea
Stellar Diamonds plc, the London listed (AIM: STEL) diamond development company focused on West Africa, announces the signature of a Joint Venture Agreement ("JVA") with Société Tassiliman ("Tassilman"), a local Guinean company, over a diamondiferous kimberlite pipe in the Aredor district of Guinea.
Highlights:
· 5 hectare Baoulé pipe is located in Aredor, Guinea's most renowned diamond mining district
· Historical data suggests a diamond grade range of between 13cpht and 40cpht
· 509 carat parcel sold in 2000 for $157/ct and prices are expected to have since increased
· In-house modelling suggests at a target of over 22 million tonnes and 3 million carats to 300m
· Alluvial mining downstream has yielded a 100ct stone and reported diamond values of over $400/ct
· Stellar can earn up to 100% interest via $5m earn-in for 75% and option to acquire remaining 25%
Chief Executive Karl Smithson commented:
"We are very pleased to have secured an option to acquire up to a 100% interest in the diamondiferous Baoulé pipe. Located in the former Aredor mining concession, which is one of the largest alluvial diamond mining areas in West Africa, the Baoulé area has a history of producing large, high quality diamonds. As yet no primary kimberlites have been developed and the Baoulé pipe has many of the hallmarks of a potentially large tonnage project that can be rapidly advanced.
"Whilst we equally remain focused on the feasibility study of our Tongo project in Sierra Leone, Stellar is leveraging off its established connections to secure additional projects with exceptional potential. West Africa holds significant diamond resources which remain largely untapped and this joint venture greatly complements our portfolio of assets. We particularly welcome our partnership with Société Tassiliman and look forward to a long-term and successful relationship in Guinea."
Baoulé Pipe Summary
The Baoulé kimberlite pipe was discovered in 1999 and was subject to drilling and initial bulk sampling by earlier operators. A valuable geological database is available on the project which shows that the pipe was delineated to 5 hectares in size and drilled to a maximum depth of 190m, but remains open at depth. Microdiamond analysis returned modelled macrodiamond grades of between 20 to 40 carats per hundred tonnes ("cpht") though bulk sampling yielded lower grades (+1mm) of 7cpht and 13cpht using pan plant and DMS technology respectively. In 2000, a parcel of 509 carats produced by the pan plant, and which did not contain any large stones, was sold for $157 per carat.
In-house modelling of previous drilling suggests a target of over 22 million tonnes to a depth of 300m. This is not a resource estimate or in accordance with the JORC Code. At the DMS generated grade of 13cpht this would suggest a target of 3 million carats. However, using the average microdiamond grade of 30cpht this target increases to 6.5 million carats. Internal company modelling suggests that the Baoulé pipe has the potential to host a significant diamond resource.
Stellar believes the previous bulk sampling was not fully representative of such a large pipe and that there is potential for higher grades to be returned using more representative, controlled and efficient processing techniques. Furthermore, the diamond value was based on a relatively small parcel which contained no recorded large diamonds, which was sold over 13 years ago. The Company believes that there may be considerable upside on the diamond price for this pipe and estimates that the parcel sold in 2000 for $157 per carat could realistically achieve prices in excess of $200 per carat in the current market.
The Banankoro / Aredor Diamond Area of Guinea
The Baoulé kimberlite pipe may be one of the sources of the high value Baoulé alluvial diamonds in the Aredor region. This area has historically produced the largest and highest value diamonds in Guinea with numerous high quality diamonds of over 200 carats having been recovered from commercial alluvial mining operations in the vicinity. Within the last 25 years, a 255 carat stone which was sold for $10million in 1989 and a 285 carat stone which was sold for $8million in 1993.
Approximately 7km downstream an alluvial diamond resource with a reported average value of $431 per carat was previously defined by an international consulting group. This was confirmed in the late 1990's by Aredor FCMC, which mined and produced diamonds at average values in excess of $400 per carat.
The Joint Venture Agreement
Stellar has signed a JVA with local company Tassiliman over a licence area covering 1km2 which hosts the 5 hectare diamondiferous kimberlite pipe. Tassiliman, the licence holder, is a Guinean incorporated company headed by the well-respected and prominent businessman El Hadj Mohammed Moustapha Kaba.
The JVA entitles Stellar to earn a 75% interest in the property through expenditure of $5 million. The time period for this expenditure is indefinite. At this point Stellar has the option, but not the obligation, to purchase at an independently assessed fair market value the remaining 25% of the project upon agreement by Tassiliman. If this option is taken then Tassiliman will be granted a 2% net profit royalty on any future production revenues. Upon vesting and earning its 75% interest Stellar will create a new company and the licence transferred into this which will become the joint venture vehicle for further development of the asset.
A management committee will be established with Tassiliman to determine and approve annual work programmes and expenditures. Stellar will remain operator of the project at all times and during production will retain full rights to marketing the diamonds on behalf of the joint venture company.
Future Work Programme
Stellar is generating an evaluation programme and budget to re-assess the Baoulé pipe through drilling and bulk sampling, using the historic database as a guideline. The initial target will be to generate an inferred diamond resource of at least three million carats for the pipe and to establish the diamond value in the current market.
Stellar intends to relocate its 5tph DMS / X-Ray diamond processing and recovery plant and selected earth moving machinery from its Droujba project, currently under care and maintenance, to the joint venture area. This infrastructure will be established on site at Baoulé and be utilised to process the bulk sample material collected as part of the evaluation programme.
About Stellar Diamonds plc
Stellar is an AIM quoted (AIM: STEL) listed West African focused diamond mining and exploration company which is advancing the 1.1 million carat Tongo Dyke-1 resource into the feasibility stage and towards a production decision in 2014. In addition, the Company holds the Droujba project which has a defined 3 million carat resource. Stellar remains in dispute with the Ministry of Mines in Sierra Leone regarding its two Kono licences and is pursuing both diplomatic and legal channels to ensure the proper reinstatement of these licences.
For further information contact the following or visit the Company's website at www.stellar-diamonds.com.
Stellar Diamonds plc
Karl Smithson, Chief Executive Officer Tel: +44 (0) 20 7010 7686
Philip Knowles, Chief Financial Officer
Daniel Stewart & Company plc
(Nominated Advisor and Broker)
Antony Legge, Ciaran Walsh, Martin Lampshire Tel: +44 (0) 20 7776 6550