TSX: DIAM
SASKATOON, July 31, 2018 /CNW/ - Star Diamond
Corporation (the "Company") reports that the unaudited results
of its operations for the quarter ended June
30, 2018 will be filed today on SEDAR and may be viewed at
www.sedar.com once posted. A summary of key financial and operating
results for the year is as follows:
Highlights
- Announced the independent Preliminary Economic Assessment
("PEA") on the Company's 100% held Star and Orion South Kimberlites
(the "Star - Orion South Diamond Project", or "Project"): 66
million carats of diamonds could be recovered in a surface mine
over a 38-year Project life:
-
- Base Case scenario (Model diamond price): Net Present
Value ("NPV") (7%) of $3.3 billion
and an Internal Rate of Return ("IRR") of 22% before taxes and
royalties, and an after-taxes and royalties NPV (7%) of
$2.0 billion with an IRR of 19% and
payback period of 3.4 years after the commencement of diamond
production;
- Case 1 scenario (High Model diamond price): NPV (7%) of
$5.4 billion for an IRR of 32% before
taxes and royalties
- Announced technical updates on proposed sampling program by Rio
Tinto Exploration Canada ("RTEC");
- Working capital of $2.3 million
at June 30, 2018;
- Issued and outstanding shares of 383.2 million at June 30, 2018
Overview
Star Diamond Corporation is a Canadian
natural resource company focused on exploring and developing
Saskatchewan's diamond
resources. In February 2018, the
Company announced that it had changed its name from Shore Gold Inc.
to Star Diamond Corporation and its trading symbol on the Toronto
Stock Exchange to "DIAM" (see News Release dated February 12, 2018). This new corporate name is in
honour of the Star Kimberlite, located in the Fort à la Corne
forest of Saskatchewan, Canada. It
was the exploration and evaluation work completed on the Star
Kimberlite, which demonstrated the significant quality, size and
value of the contained diamond populations. These high value
diamonds facilitated the consolidation and advancement of the
Company's Fort à la Corne area kimberlites, including the Star -
Orion South Diamond Project.
The Company recently announced the positive results of the
independent Preliminary Economic Assessment ("PEA") on the Project.
The PEA estimates that 66 million carats of diamonds could be
recovered in a surface mine over a 38-year Project life, with a Net
Present Value ("NPV") (7%) of $2.0
billion after tax, an Internal Rate of Return ("IRR") of 19%
and an after-tax payback period of 3.4 years after the commencement
of diamond production (see News Release dated April 16, 2018). As a result of the 2017 mineral
property consolidation and concurrent earn-in agreement with RTEC
(see News Release dated June 23,
2017), the Company is now in an enhanced position to advance
its 100% held Star - Orion South Diamond Project.
Activities relating to the Star - Orion South Diamond
Project
During the quarter ended June
30, 2018, RTEC, Bauer Maschinen GmbH ("Bauer") and Nuna
Logistics Limited finalized contractual arrangements for the
manufacture, supply and operation of equipment to be used for the
next phase of large diameter bulk sample drilling on the Star
Kimberlite (See News Release dated April 12,
2018). RTEC aim to use a Bauer BC 50 Cutter mounted on a
Bauer MC 128 Duty-cycle Crane to drill and sample to depths of up
to 250 metres below surface. Each ten metres of advance down hole
aims to excavate some 100 tonnes of kimberlite. Bauer cutter rigs
are used around the world for complex engineering projects. Bauer
has indicated that this will be the first time in the world that
this technology will be used in an active project to reach a depth
of 250 meters.
RTEC and Consulmet (Pty) Ltd ("Consulmet") recently finalized
contractual arrangements for the manufacture and supply of a 30
tonne per hour ("tph") bulk sample plant (See News Release dated
May 15, 2018). The bulk sample plant
is specifically designed to maximize liberation and recovery of
diamonds throughout the -25+0.85 millimetre size range, and
minimize diamond breakage, particularly among potential specials
(plus 10.8 carat stones) that may be recovered from both the Star
and Orion South Kimberlites. The bulk sample plant will be
fabricated by Consulmet in South
Africa in modular, containerized units, which will
facilitate shipment to the Project site. The proposed bulk sample
plant will use a modern flow-sheet and the latest X-ray
transmission ("XRT") sorting technology to ensure any large
diamonds present (up to 25 millimetres) are recovered with minimal
breakage. A secondary crushing circuit, using a high pressure rolls
crusher ("HPRC"), will maximize the liberation of smaller diamonds
from the kimberlite. The bulk sample plant consists of four areas,
each with its own control system: 1) a wet front-end and feed
preparation area; 2) an XRT sorter area; 3) a 10 tph dense media
separator ("DMS") area; and 4) a water reticulation area. RTEC is
currently preparing the Project site for the commencement of the
proposed bulk sample drilling program, with drilling to commence
this year.
In January 2017, the Company was
informed by the Saskatchewan
Minister of Environment that additional consultation is required
for the government to meet its legal obligation with respect to
duty to consult and accommodate process (See News Release dated
January 26, 2017). The Ministry has
indicated to the Company that significant progress has been made on
meeting its duty to consult obligations and that once consultations
with potentially impacted First Nation and Métis communities are
completed, all pertinent information will be reviewed before a
decision is made under The Environmental Assessment Act. The
Canadian Environmental Assessment Agency previously announced an
Environmental Assessment Decision for the proposed Project in which
the federal Environment Minister indicated that the Project "is not
likely to cause significant adverse environmental effects when the
mitigation measures described in the Comprehensive Study Report are
taken into account" (See News Release dated December 3, 2014).
Quarterly results
For the quarter ended June 30, 2018, the Company recorded net loss of
$1.8 million or $0.00 per share (basic and fully diluted)
compared to net income of $43.0
million or $0.14 per share for
the same period in 2017. The loss during the quarter ended
June 30, 2018 was due to operating
costs and exploration and evaluation expenditures incurred by the
Company. Net income during the quarter ended June 30, 2017 was due to the partial reversal of
previously recorded impairments relating to exploration and
evaluation assets ($44.5
million).
Year to date results
For the six months ended
June 30, 2018, the Company recorded a
net loss of $2.5 million or
$0.01 per share compared to net
income of $42.2 million or
$0.14 per share for the same period
in 2017. The loss during the three and six months ended
June 30, 2018 was primarily due to
ongoing operating costs and exploration and evaluation expenditures
incurred by the Company exceeding interest and other income earned.
Net income during the three and six months ended June 30, 2017 was due to the partial reversal of
previously recorded impairments relating to exploration and
evaluation assets ($44.5 million).
Exploration and evaluation expenditures incurred during the six
months ended June 30, 2018 primarily
related to work relating to geotechnical investigations and test
work for the Project as well as other costs associated with the
PEA.
Selected financial highlights include:
Condensed
Consolidated Statements of Financial Position
|
As
at
June
30,
2018
|
As
at
December
31,
2017
|
Current
assets
|
$
|
2.5
M
|
$
|
4.2
M
|
Exploration and
evaluation, capital and other assets
|
67.8
M
|
67.7
M
|
Current
liabilities
|
0.2
M
|
0.4
M
|
Premium on
flow-through shares and non-current liabilities
|
1.5
M
|
1.5
M
|
Shareholders'
equity
|
68.6
M
|
70.0
M
|
Consolidated
Statements of Income (Loss)
|
Three Months
Ended June 30,
2018
|
Three Months
Ended June 30,
2017
|
Six
Months
Ended June 30,
2018
|
Six Months
Ended June 30,
2017
|
Interest and other
income
|
$
|
0.1
M
|
$
|
0.0
M
|
$
|
0.1
M
|
$
|
0.0
M
|
Expenses
|
2.0
M
|
1.5
M
|
2.8
M
|
2.4
M
|
Flow-through premium
recognized in income
|
0.1
M
|
0.0
M
|
0.1
M
|
0.1
M
|
Reversal of prior
impairments to exploration and evaluation assets
|
0.0
M
|
44.5
M
|
0.1
M
|
44.5
M
|
Net income (loss) for
the period
|
(1.8) M
|
43.0
M
|
(2.5) M
|
42.2
M
|
Net income (loss) per
share for the period (basic and diluted)
|
0.00
|
0.14
|
0.01
|
0.14
|
Condensed
Consolidated Statements of Cash Flows
|
Six Months
Ended June30,
2018
|
Six Months
Ended June 30,
2017
|
Cash flows from
operating activities
|
$
|
(1.9) M
|
$
|
(0.4) M
|
Cash flows from
investing activities
|
(0.1) M
|
(1.0) M
|
Cash flows from
financing activities
|
0.1
M
|
1.3
M
|
Net decrease in
cash
|
(1.9) M
|
(0.1) M
|
Cash – beginning of
period
|
4.0
M
|
2.8
M
|
Cash – end of
period
|
2.1
M
|
2.7
M
|
Outlook
The positive results of the PEA show that the
Star and Orion South Kimberlites have the potential to be
economically developed as a diamond mine. On the shoulders of more
detailed drilling and the Revised Resource Estimate of 2015, the
Company has taken a fresh look at the Project and has refined the
mining and processing plans with exciting and positive results.
The successful completion of the 2017 consolidation of the
Company's Fort à la Corne mineral properties (including the Star -
Orion South Diamond Project) and the concurrent earn-in arrangement
with RTEC sets the stage for a new phase for the Company. It is the
Company's view that Rio Tinto is one of the few companies in the
world with the resources and expertise to move forward with a
project of the magnitude of the Star - Orion South Diamond Project.
The Company is also very pleased to have acquired the remaining
portion of the Project from Newmont while continuing to have
Newmont as a significant shareholder.
As of July 31, 2018, the Company
had approximately $1.9 million in
cash and cash equivalents and short-term investments (excluding
$0.6 million in restricted cash). A
portion of the Company's cash and cash equivalents and short-term
investments will be used for 2018 programs (including flow-through
commitments) to further assess, evaluate and advance certain
aspects of the Project, as well as for general corporate
matters.
Caution Regarding Forward-looking
Statements
This news release contains forward-looking
statements within the meaning of certain securities laws, including
the "safe harbour" provisions of Canadian securities legislation
and the United States Private Securities Litigation Reform Act of
1995. The words "may," "could," "should," "would," "suspect,"
"outlook," "believe," "plan," "anticipate," "estimate," "expect,"
"intend," and words and expressions of similar import are intended
to identify forward-looking statements, and, in particular,
statements regarding the Company's future operations, future
exploration and development activities or other development plans
contain forward-looking statements. Forward-looking statements in
this news release include, but are not limited to, disclosure
regarding the economics and project parameters presented in the
PEA, including, without limitation, IRR, NPV and other costs and
economic information, carats of diamonds to be recovered, pre-tax
payback period, tonnes of kimberlite to be mined, carats per tonne
to be recovered (grade), diamond prices, life of mine, capital
costs, length of pre-production period; statements related to
mineral resources and/or reserves; statements related to the
approval of the development of the Star - Orion South Diamond
Project; statements relating to future development of the Star -
Orion South Diamond Project and associated timelines; the
environmental assessment and permitting process; the Company's
intention to seek additional financing in the ensuing years;
statements with respect to geotechnical investigations, assessments
and test work; the proposed sampling program; Company and RTEC's
objectives for the ensuing year.
These forward-looking statements are based on the Company's
current beliefs as well as assumptions made by and information
currently available to it and involve inherent risks and
uncertainties, both general and specific. Risks exist that
forward-looking statements will not be achieved due to a number of
factors including, but not limited to, developments in world
diamond markets, changes in diamond valuations, risks relating to
fluctuations in the Canadian dollar and other currencies relative
to the US dollar, changes in exploration, development or mining
plans due to exploration results and changing budget priorities of
the Company or its contractual partners, the effects of competition
in the markets in which the Company operates, the impact of changes
in the laws and regulations regulating mining exploration and
development, judicial or regulatory judgments and legal
proceedings, operational and infrastructure risks and the
additional risks described in the Company 's most recently filed
Annual Information Form, annual and interim MD&A, news releases
and technical reports. The Company 's anticipation of and
success in managing the foregoing risks could cause actual results
to differ materially from what is anticipated in such
forward-looking statements.
Although management considers the assumptions contained in
forward-looking statements to be reasonable based on information
currently available to it, those assumptions may prove to be
incorrect. When making decisions with respect to the Company,
investors and others should not place undue reliance on these
statements and should carefully consider the foregoing factors and
other uncertainties and potential events. Unless required by
applicable securities law, the Company does not undertake to update
any forward-looking statement that may be made.
SOURCE Star Diamond Corporation