TSX: DIAM
SASKATOON, March 26, 2020 /CNW/ - Star Diamond
Corporation ("DIAM", "Star Diamond" or the "Company")
reports that the audited results of its operations for the year
ended December 31, 2019 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 study results that indicate a high proportion of Type
IIa diamonds present in both the Star (26.5 percent) and the Orion
South (12.5 percent) kimberlites;
- Announced updates on bulk sampling program by Rio Tinto
Exploration Canada ("RTEC") on the Company's 100% held Star and
Orion South Kimberlites (the "Star - Orion South Diamond Project",
or "Project");
- Announced completion of drilling of ten bulk sampling holes
(trenches) by RTEC on the Company's Star Kimberlite;
- Announced that the Company notified RTEC that its purported
exercise in November 2019 of its four
options under the Option to Joint Venture Agreement dated
June 22, 2017 (the "Option
Agreement") did not comply with the terms of the Option Agreement
and has commenced legal proceedings;
- Working capital of $7.7 million
at December 31, 2019;
- Issued and outstanding shares of 428.5 million at December 31, 2019
Overview
Star Diamond Corporation is a Canadian
natural resource company focused on exploring and developing
Saskatchewan's diamond
resources. In June 2017, the
Company announced that it had acquired (the "Newmont Acquisition")
from Newmont Corporation ("Newmont") all of Newmont's participating
interest in the Fort à la Corne joint venture (the "FalC JV"),
resulting in the Company owning 100% of the Fort à la Corne mineral
properties (including the Project), and concurrently entered into
an Option to Joint Venture Agreement (the "Option Agreement") with
RTEC, a wholly-owned subsidiary of Rio Tinto, pursuant to which the
Company has granted RTEC an option to earn up to a 60% interest in
the Company's Fort à la Corne mineral properties (including the
Project) on the terms and conditions contained in the Option
Agreement (see News Release dated June 23,
2017).
In November 2019, Star Diamond received notice (the "Exercise
Notice") from RTEC advising that RTEC was exercising all four of
its options under the Option Agreement (see News Release dated
November 15, 2020). The Company has
formed a Special Committee of non-management directors to review
and consider the Exercise Notice, including whether the options
have been validly exercised by RTEC, to oversee the Company's
dealings with RTEC including in relation to the Exercise Notice and
to consider the Company's alternatives in the context of the
Exercise Notice. In February 2020,
the Company notified RTEC that its purported exercise in
November 2019 of its four options
under the Option Agreement did not comply with the terms of the
Agreement (see News Release dated February
18, 2020).
While Star Diamond has not to
date been provided with any meaningful data from RTEC's operations
at the Project, Star Diamond
believes that RTEC's continuing actions and conduct in relation to
the Project are consistent with a belief by Rio Tinto that the
Project warrants significant continued investment. Star Diamond believes that RTEC has expended
significant funds at the Project to date, and that RTEC intends to
continue doing so during 2020.
Star Diamond is committed to
taking all actions necessary to ensure that the interests of the
Company, its shareholders and its many Saskatchewan-based and other stakeholders are
protected in connection with the Project, including by enforcing
all of Star Diamond's rights under
the Agreement. The Company recently announced that it has commenced
legal proceedings in the Court of Queen's Bench for Saskatchewan (Judicial Centre of Regina) against RTEC in relation to RTEC's
purported exercise (see News Release dated March 5, 2020).
Activities relating to the Star - Orion South Diamond Project
and Fort à la Corne mineral properties
During 2019, the
Company announced the results of a study into the abundance of Type
IIa diamonds in the diamond parcels recovered from the Star and
Orion South Kimberlites (see News Release dated March 4, 2019). This study confirmed that
unusually high proportions of Type IIa diamonds are present in both
the Star (26.5 percent) and the Orion South (12.5 percent)
kimberlites. The diamonds analysed in this study represent a
spectrum of diamond sizes from +11 DTC (+0.32 carats) through all
of the large stones, up to diamonds of nearly 50 carats. Type IIa
diamonds are very rare and account for approximately less than two
percent of all natural rough diamonds mined from kimberlites. Type
IIa diamonds usually have anhedral crystal shape and exhibit a
range of elongated, distorted or irregular morphologies. Most
importantly, many high-value, top colour, large specials (greater
than 10.8 carats) are Type IIa diamonds, which include all ten of
the largest known rough diamonds recovered worldwide, from the 726
carat Jonker to the 3,106 carat Cullinan.
During 2019, the Company announced that RTEC completed the
drilling of ten bulk sample holes (trenches) on the Company's Star
Kimberlite using the Trench Cutter Sampling Rig (See News Release
dated October 8, 2019). The ten holes
completed on the Star Kimberlite included a total of 2,351 metres
of trench cutter drilling and intersected a total of 1,215.5 metres
of kimberlite. Kimberlite was pumped to surface and recovered using
a Kimberlite Separation Unit ("KSU"), with samples
loaded and in cubic metre bulk bags, which total 6,848 in number
(estimated by RTEC to be approximately 8,271 wet tonnes). As the
on-site Bulk Sample Plant ("BSP") was not constructed or
commissioned prior to the completion of the ten Star kimberlite
trench cutter holes, the resulting 6,848 sample bags are being
stored by RTEC until the on-site BSP is fully constructed and
commissioned.
The Trench Cutter Sampling Rig being utilized by RTEC consists
of a Bauer BC 50 Cutter mounted on a Bauer MC 128 Duty-cycle Crane.
Cutter rigs by Bauer are used around the world for complex
engineering projects. Bauer has indicated that this is the first
time in the world that this technology is being used in an active
project to sample kimberlite at depths of up to 250 meters. At each
bulk sampling trench cutter hole location, the surface was first
stabilized (See News Release dated May 23,
2019). Cement is mixed with the top 20 metres of
near-surface sands in order to stabilize the unconsolidated sand
overburden.
The Trench Cutter Sampling Rig excavates a rectangular hole of
3.2 by 1.5 metres. Bauer and RTEC have indicated that the Trench
Cutter Sampling Rig's cutter head was designed to excavate
kimberlite fragments of up to 80 millimetres in diameter, which are
then pumped in a slurry to the surface to the KSU. The KSU was
designed to recover kimberlite fragments between 80 and 0.85
millimetres from the Trench Cutter Sampling Rig slurry. The Trench
Cutter Sampling Rig and associated KSU was designed to minimize
diamond breakage during sample excavation, washing and bagging.
The trench cutter samples that were collected from RTEC's 2019
bulk sampling program of the Star Kimberlite is to be processed by
RTEC following construction and commissioning of the BSP. RTEC is
to proceed with the processing of t. Final diamond recovery from
the concentrates produced by the BSP is to be conducted at a secure
off-site facility.
During the second quarter of 2019, the Company announced that
RTEC completed sonic and core drilling on the Orion South
Kimberlite (see News Releases dated April
15, 2019 and December 11,
2017). The sonic drilling provides a detailed log of the
overburden stratigraphy above the kimberlite, while the core holes
were drilled to generate detailed logs of the kimberlite geology at
each locality in preparation for RTEC's anticipated bulk sampling
of the Orion South Kimberlite using the Trench Cutter Sampling
Rig.
Year to Date Results
For the year ended December 31, 2019, the Company recorded a net
loss of $4.1 million or $0.01 per share (basic and fully diluted)
compared to a net loss of $4.6
million or $0.01 per share in
2018. The losses during 2019 and 2018 were primarily due to ongoing
operating costs and exploration and evaluation expenditures
incurred by the Company exceeding interest and other income
earned.
Selected financial highlights include:
Condensed
Consolidated Statements of Financial Position
|
As
at
December
31,
2019
|
As
at
December
31,
2018
|
Current
assets
|
$ 8.0
M
|
$ 2.9
M
|
Exploration and
evaluation, capital and other assets
|
67.7
M
|
67.5
M
|
Current
liabilities
|
0.3
M
|
0.3
M
|
Non-current
liabilities
|
1.6
M
|
1.3
M
|
Shareholders'
equity
|
73.8
M
|
68.8
M
|
Consolidated
Statements of Income (Loss)
|
Year
Ended
December 31,
2019
|
Year Ended
December 31,
2018
|
Interest and other
income
|
$ 0.1
M
|
$ 0.1
M
|
Expenses
|
4.2
M
|
4.8
M
|
Flow-through premium
recognized in income
|
0.0
M
|
0.2
M
|
Investment in Wescan
Goldfields Inc.
|
0.0
M
|
(0.1) M
|
Net loss for the
period
|
(4.1) M
|
(4.6) M
|
Net loss per share
for the period (basic and diluted)
|
0.01
|
0.01
|
Condensed
Consolidated Statements of Cash Flows
|
Year Ended
December 31,
2019
|
Year Ended
December 31,
2018
|
Cash flows from
operating activities
|
$ (2.7) M
|
$ (3.0) M
|
Cash flows from
investing activities
|
(0.0) M
|
(0.1) M
|
Cash flows from
financing activities
|
7.8
M
|
1.9
M
|
Net increase
(decrease) in cash
|
5.1
M
|
(1.2) M
|
Cash – beginning of
period
|
2.8
M
|
4.0
M
|
Cash – end of
period
|
7.9
M
|
2.8
M
|
Outlook
The provincial environmental approval of the
Star - Orion South Diamond Project received in 2018, alongside the
previous positive federal decision, marked a major milestone for
the Project. In addition, the positive results of the 2018 PEA
shows that the Project can be economically developed and operated
while providing direct employment for hundreds of people throughout
the construction phase and hundreds of people continuously over its
estimated 38 year mine life.
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 defined the start of a new phase for the Company. There
are some 60 other kimberlites within the Company's Fort à la Corne
diamond district, on mineral dispositions held 100 percent by the
Company. The Company is also very pleased to continue to have
Newmont Corporation as a significant shareholder.
As of March 26, 2020, the Company
had approximately $7.2 million in
cash and cash equivalents (excluding $0.6
million in restricted cash). A portion of the Company's cash
and cash equivalents will be used for 2020 programs (including
flow-through commitments) to further assess, evaluate and advance
certain aspects of the Company's mineral properties, as well as for
general corporate matters.
About Star Diamond Corporation
Star Diamond
Corporation is a Canadian based corporation engaged in the
acquisition, exploration and development of mineral properties.
Shares of the Corporation trade on the TSX Exchange under the
trading symbol "DIAM". The Fort à la Corne kimberlites (including
the Star - Orion South Diamond Project) are located in central
Saskatchewan in close proximity to
established infrastructure, including paved highways and the
electrical power grid, which provide significant advantages for
future mine development.
During 2018, the Company 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).
During 2018, the Saskatchewan Ministry of Environment approved
the Company's Star - Orion South Diamond Project (See News Release
dated October 25, 2018). The Canadian
Environmental Assessment Agency previously announced a positive
Environmental Assessment Decision for the proposed Project by the
federal Environment Minister (See News Release dated December 3, 2014).
Caution Regarding Forward-looking Statements
This news release contains forward-looking statements as defined
by certain securities laws, including the "safe harbour" provisions
of Canadian securities legislation and the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
information is often, but not always, identified by the use of
words such as "anticipate", "believe", "expect", "plan", "intend",
"forecast", "target", "project", "guidance", "may", "will",
"should", "could", "estimate", "predict" or similar words
suggesting future outcomes or language suggesting an outlook. In
particular, statements regarding the Company's future operations,
future exploration and development activities or other development
plans constitute forward-looking statements. By their nature,
statements referring to mineral reserves, mineral resources, PEA or
TFFE constitute forward-looking statements. Forward-looking
statements contained or implied in this news release include, but
are not limited to, the Company's intentions with respect to its
dealings with RTEC, including in relation to RTEC's purported
exercise of the Options and the related issues Star Diamond has raised with RTEC; 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, after-tax
payback period, tonnes of kimberlite to be mined, carats per tonne
to be recovered (grade), diamond prices, project life, life of
mine, capital costs, and 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;
statements with respect to environmental permitting and approvals;
the Company's intention to seek additional financing in the ensuing
years; statements with respect to metallurgical investigations,
assessments and test work; the potential proportion of Type IIa
diamonds in the Star and Orion South kimberlites and the potential
for the recovery of large high quality diamonds; RTEC's and the
Company's objectives for the ensuing year, including the timing for
revision or replacement of the desanding plant, timing for delivery
and construction of the bulk sample processing plant and timing for
recommencement of the bulk sampling program; as well as the
Brownfields programs.
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 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 is made herein.
SOURCE Star Diamond Corporation