TSX: DIAM
SASKATOON, SK, March 30, 2021 /CNW/ - Star Diamond
Corporation (TSX: DIAM) ("Star Diamond" or the "Company")
reports that the audited results of its operations for the year
ended December 31, 2020 will be filed
today on SEDAR and may be viewed at www.sedar.com once
posted. A summary of key financial and operating results is as
follows:
Highlights
- Announced the initial results from the processing of bulk
samples by Rio Tinto Exploration Canada Inc. ("Rio Tinto
Canada") from its 10 trench cutter hole program conducted in
2019 on the Company's Star and Orion South Kimberlites (the "Star -
Orion South Diamond Project", or the "Project")
- Announced Rio Tinto Canada's confirmation to Star Diamond that this bulk sample program had
met Rio Tinto Canada's objective of improving confidence in the
diamond grade of the Project
- Advanced the legal proceedings commenced by Star Diamond against Rio Tinto Canada arising
out of the purported exercise in November
2019 by Rio Tinto Canada of its four options under the
Option to Joint Venture Agreement dated June
22, 2017 (the "Option Agreement")
- Announced microdiamond results from Rio Tinto Canada's drilling
on the Orion North kimberlite cluster, which contained two
macrodiamonds, the largest being a 0.552 carat fragment
- Announced a geotechnical drilling program by Rio Tinto Canada
on the Orion North kimberlite cluster
- Working capital of $4.0 million
at December 31, 2020
- Issued and outstanding shares of 438.7 million at December 31, 2020
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 from Newmont Corporation all
of its participating interest in the Fort à la Corne joint venture,
resulting in the Company owning 100% of the Fort à la Corne mineral
properties (including the Project), and concurrently entered into
the Option Agreement with Rio Tinto Canada pursuant to which the
Company granted Rio Tinto Canada 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 from Rio Tinto
Canada advising that Rio Tinto Canada was purporting to exercise
all four of its options under the Option Agreement (see News
Release dated November 15, 2019). In
February 2020, the Company notified
Rio Tinto Canada that its purported exercise of its four options
under the Option Agreement did not comply with the terms of the
Option Agreement (see News Release dated February 18, 2020). In March 2020, the Company announced that it had
commenced legal proceedings in the Court of Queen's Bench for
Saskatchewan (Judicial Centre of
Saskatoon) (the "Court") against
Rio Tinto Canada (the "Legal Proceedings") in relation to Rio Tinto
Canada's purported exercise of its options under the Option
Agreement (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 that Rio Tinto Canada completed the drilling
of ten bulk sample holes (trenches) on the Company's Star
Kimberlite using the Trench Cutter Sampling Rig. These ten trench
cutter holes 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 the surface and recovered using a
Kimberlite Separation Unit, with samples loaded and
stored in cubic metre bulk bags. As the on-site bulk sample plant
(the "BSP") was not constructed or commissioned by Rio Tinto
Canada prior to the completion of the ten trench cutter holes,
Rio Tinto Canada established a storage area where 6,848 bulk
sample bags were stored by Rio Tinto Canada on-site until the
BSP was fully constructed and commissioned.
During the second quarter of 2020, the Company announced that
Rio Tinto Canada had commenced the processing of bulk samples
from Rio Tinto Canada's trench cutter program on the Star
Kimberlite (see News Release dated April 23,
2020). The mineral concentrates produced by the BSP were
shipped by Rio Tinto Canada to an off-site facility for
diamond recovery and reporting of such recovery to Star Diamond and Rio Tinto Canada.
The initial results from the ten trench cutter holes have now
been reported by Star
Diamond.
During February 2021, Rio Tinto
Canada provided written notice to Star
Diamond that Rio Tinto Canada had successfully
completed the ten trench cutter hole bulk sample program excavated
by Rio Tinto Canada in 2019 at the Project (see News Release dated
February 22, 2021). Rio Tinto Canada
also confirmed to Star Diamond that
this bulk sample program had met Rio Tinto Canada's objective of
improving confidence in the diamond grade of the Project. As
well, Rio Tinto Canada stated that it had completed the processing,
diamond recovery and reporting of all diamond results on the ten
trench cutter holes. In response, Star Diamond notified Rio Tinto Canada that
completion of a comprehensive diamond breakage study and certain
other work remains outstanding. Star
Diamond also notified Rio Tinto Canada that, until the
comprehensive diamond breakage study and that other work is
completed, the processing, diamond recovery and reporting of all
diamond results from the ten cutter hole bulk sample program will
not be complete. Rio Tinto Canada has previously assured
Star Diamond that a comprehensive
diamond breakage study would be completed by Rio Tinto Canada as
part of the bulk sample program.
The initial results from the ten reported trenches continue to
validate the grades outlined in the Company's independent
Preliminary Economic Assessment ("PEA") that was based upon
Star Diamond's own prior
underground bulk sampling and large diameter drilling
programs. The recovery of larger diamonds from Rio Tinto Canada's
bulk sample program, including larger Type IIa diamonds, also
continues to strengthen the expectation for recovery of large, high
value diamonds in a future producing diamond mine. However, as
previously disclosed by Star
Diamond, the Company believes that Rio Tinto Canada's
extraction and diamond recovery methodologies, including its use of
unproven civil engineering trenching technologies to conduct bulk
sampling of Kimberlite, caused undue diamond breakage,
resulted in significant unnecessary cost overruns and materially
damaged Star Diamond's interest in
the Project. Comprehensive diamond breakage studies are required to
assess the nature, extent and potential causes of the diamond
breakage, and the possibility that larger diamonds would have been
recovered absent such breakage.
During the second quarter of 2020, the Company also
announced that Rio Tinto Canada provided the Company with
microdiamond results from the PQ3 (83 millimetre) core hole
120FB001, which Rio Tinto Canada drilled in November of 2019
(see News Release dated May 11,
2020). This hole was drilled on the Company's K120
Kimberlite, which forms part of the Orion North kimberlite cluster.
The Company noted that the microdiamond results provided to
Star Diamond contained two
macrodiamonds, the largest weighing 0.552 carats. This 0.552 carat
diamond fragment has been broken from a larger stone. The
occurrence of a 0.552 carat diamond in a microdiamond sample is
anomalous and speaks to the potential for a coarse diamond size
frequency distribution and also supports previous evaluation work
conducted by Star Diamond on the
Orion North Kimberlites. The results from Rio Tinto Canada's drill
program also highlights the evaluation potential of the extensive
volumes of kimberlite that are outside of the Project.
The Company recently announced that Rio Tinto Canada commenced
an eight-hole geotechnical drilling program on and in proximity to
the Orion North Kimberlite in early January
2021 (see News Release dated January
19, 2021). The drill rigs being utilized are capable of
sonic drilling to obtain representative samples of the glacial
overburden and core drilling for the underlying kimberlite or host
rock sediments. Star Diamond has
been advised that the aim of this drilling is to investigate the
geotechnical properties of the overburden, kimberlite and host rock
sediments, with this information to be used for future open pit
design. Parts of the Orion North Kimberlite have shallower
overburden (of approximately 95 metres) than both the Star and
Orion South Kimberlite.
On December 30, 2020, the Company
completed a flow-through private placement financing whereby
approximately 5.56 million flow-through Units where issued for
proceeds of $1.0 million (see News
Release dated December 30, 2020). On
January 21, 2021, the Company
completed a non flow-through private placement financing whereby
approximately 13.33 million non flow-through Units were issued for
proceeds of $2.0 million (see News
Release dated January 21, 2021). Each
Unit was comprised of one common share and one warrant. Each whole
warrant entitles the holder thereof to purchase one common share at
a price of $0.25, for a period of
twenty-four months from closing of the applicable private
placement.
Activities relating to the Legal Proceedings
Star Diamond continues to vigorously
pursue the Legal Proceedings, and is committed to taking all
actions necessary to protect Star
Diamond and its shareholders from the practices and conduct
of Rio Tinto Canada.
Pleadings in the Legal Proceedings have been completed, with
Star Diamond's delivery of its
Second Amended Statement of Claim in December 2020, Rio Tinto Canada's delivery of its
Second Amended Statement of Defence and Counterclaim in
December 2020, and Star Diamond's delivery of its Reply and Defence
to the Counterclaim in January
2021.
Earlier this month, Rio Tinto Canada and Star Diamond each delivered their respective
affidavits of documents to the other. Star Diamond expects that the parties will agree
to a timetable for the completion of the other principal pre-trial
steps, including oral questioning and the exchange of expert
reports, which Star Diamond hopes
will be completed during 2021. Once the pre-trial steps are
completed, Star Diamond expects that
the Court will schedule a pre-trial conference and set a date for
trial. Star Diamond does not expect
that the trial will occur in 2021.
As previously disclosed by Star
Diamond, Rio Tinto Canada provided an undertaking (the
"Undertaking") to the Court, which was referred to in an
August 10, 2020 decision of the Court
in connection with the Legal Proceedings. The Undertaking is
binding on Rio Tinto Canada.
As the Undertaking is described by the Court in its August 10, 2020 decision, Rio Tinto Canada agreed
that it would not call and/or conduct any meeting of the management
committee under the joint venture agreement (the "Joint Venture
Agreement") between Star Diamond and
Rio Tinto Canada for a period of 120 days following Rio Tinto
Canada completing the processing, diamond recovery and reporting of
all diamond results on the samples previously taken from the ten
bulk sample trenches excavated by Rio Tinto Canada in 2019.
Consistent with the Undertaking, Star
Diamond has advised Rio Tinto Canada that, until all
processing, diamond recovery and reporting of all diamond results
from the ten cutter hole bulk sample program is completed,
including the comprehensive diamond breakage study, the 120-day
period under the Undertaking cannot begin to run. Notwithstanding
that the comprehensive diamond breakage study has not been
completed, Rio Tinto Canada advised Star
Diamond on February 8, 2021
that the 120-day period commenced on that date, and that Rio Tinto
Canada intends to call a management committee meeting under the
Joint Venture Agreement once the 120-day period has elapsed. Rio
Tinto Canada claims the completion of the comprehensive diamond
breakage study that it previously said would be undertaken is not
required by the Undertaking it has given. Star Diamond will vigorously resist any attempt
by Rio Tinto Canada to call a management committee meeting other
than in compliance with the Undertaking (see News Release dated
February 22, 2021).
Year to Date Results
For the year ended December 31, 2020, the Company recorded a net
loss of $6.1 million or $0.01 per share (basic and fully diluted)
compared to a net loss of $4.1
million or $0.01 per share in
2019. The losses during 2020 and 2019 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,
2020
|
As
at
December
31,
2019
|
Current
assets
|
$
|
5.0
M
|
$
|
8.0
M
|
Exploration and
evaluation, capital and other assets
|
67.6
M
|
67.7
M
|
Current
liabilities
|
1.0
M
|
0.3
M
|
Non-current
liabilities
|
1.2
M
|
1.6
M
|
Shareholders'
equity
|
70.4
M
|
73.8
M
|
Consolidated
Statements of Income (Loss)
|
Year
Ended
December 31,
2020
|
Year Ended
December 31,
2019
|
Interest and other
income
|
$
|
0.1
M
|
$
|
0.1
M
|
Expenses
|
6.1
M
|
4.2
M
|
Loss before
undernoted items
|
6.0
M
|
4.1
M
|
Investment in Wescan
Goldfields Inc.
|
0.1
M
|
0.0
M
|
Contingent
consideration
|
(0.2) M
|
0.0
M
|
Net loss for the
period
|
6.1
M
|
4.1
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,
2020
|
Year Ended
December 31,
2019
|
Cash flows from
operating activities
|
$
|
(4.7) M
|
$
|
(2.7) M
|
Cash flows from
investing activities
|
(0.0) M
|
(0.0) M
|
Cash flows from
financing activities
|
1.6
M
|
7.8
M
|
Net increase
(decrease) in cash
|
(3.1) M
|
5.1
M
|
Cash – beginning of
period
|
7.9
M
|
2.8
M
|
Cash – end of
period
|
4.8
M
|
7.9
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 independent PEA show
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 Rio Tinto Canada 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 30, 2021, the Company
had approximately $5.3 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 programs (including remaining
flow-through commitments) to further assess, evaluate and advance
certain aspects of the Company's mineral properties, as well as for
general corporate matters.
Notwithstanding the work that has been and continues to be
undertaken by Rio Tinto Canada in relation to the Project, and
prior statements made by Rio Tinto Canada and its affiliates in
relation to the Project including as referred to above, there can
be no assurance that Rio Tinto Canada will seek to further invest
in the Project or seek to develop the Project into an operating
mine, nor regarding what further studies, analyses, criteria or
conditions Rio Tinto Canada may consider relevant to its assessment
of whether to do so.
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 Company trade on the TSX 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 or the
PEA constitute forward-looking statements. Forward-looking
statements contained or implied in this news release include, but
are not limited to, statements related to the Legal Proceedings
commenced by the Company against Rio Tinto Canada; statements
regarding the processing and analysis of, and reporting of results
from, the bulk samples previously collected by Rio Tinto Canada and
the timeline for doing so; statements related to diamond breakage
and other actions to complete the processing, diamond recovery and
reporting of all diamond results on the samples previously taken
from the ten bulk sample trenches excavated by Rio Tinto Canada in
2019; statements related to Star
Diamond's intention to enforce the Undertaking; disclosure
regarding the economics and project parameters presented in the
PEA, including, without limitation, Internal Rate of Return, Net
Present Value 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 need for
and intention to seek additional financing; statements with respect
to metallurgical investigations, assessments and test work
including diamond breakage studies; and
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.
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
Rio Tinto Canada or the Company, the nature and outcome of studies,
analyses, criteria or conditions that Rio Tinto Canada may consider
relevant to its assessment of whether to seek to further invest in
the Project or seek to develop the Project into an operating mine,
the effects of competition in the markets in which the Company
operates, risks related to the Legal Proceedings including
regarding the counterclaim of Rio Tinto Canada against the Company
and any future legal proceedings to enforce the Undertaking, the
impact of the COVID-19 pandemic, risks related to the operation of
the BSP and the processing methods being used by Rio Tinto Canada
and the effectiveness thereof, risks related to diamond breakage
and cost overruns and other consequences arising from Rio Tinto
Canada's extraction and diamond recovery methodologies, risks
related to the Company's need for additional financing and the
Company's ability to raise that financing, 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 the Company 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.
www.stardiamondcorp.com
SOURCE Star Diamond Corporation