TSX: DIAM
SASKATOON, SK, Aug. 12, 2021 /CNW/ - Star Diamond
Corporation ("Star Diamond" or the "Company") reports that
the unaudited results of its operations for the three and six
months ended June 30, 2021 will be
filed today on SEDAR and may be viewed at www.sedar.com once
posted. All currency amounts are in Canadian dollars. A summary of
key financial and operating results for the three months ended
June 30, 2021 is as follows:
Highlights
- Continued pursuit of the legal proceedings commenced by
Star Diamond against Rio Tinto
Exploration Canada Inc. ("Rio Tinto") arising out of the purported
exercise in November 2019 by Rio
Tinto of its four options under the Option to Joint Venture
Agreement dated June 22, 2017 (the
"Option Agreement")
- Working capital of $3.1 million
at June 30, 2021
- Issued and outstanding shares of 452.8 million at June 30, 2021
Overview
Star Diamond 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 Star - Orion South Diamond Project (the
"Project"). The Company concurrently announced that it had
entered into the Option Agreement with Rio Tinto pursuant to which
the Company granted Rio Tinto 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
advising that Rio Tinto 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
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
(the "Legal Proceedings") in relation to Rio Tinto'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 completed the
drilling of ten bulk sample holes (trenches) on the Company's Star
Kimberlite. 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.
During the second quarter of 2020, the Company announced that
Rio Tinto had commenced the processing of these bulk samples (see
News Release dated April 23, 2020).
The initial results from these ten trench cutter holes have now
been reported by Star
Diamond.
During February 2021, Rio Tinto
provided written notice to Star
Diamond that Rio Tinto had successfully completed its
ten-trench cutter hole bulk sample program (see News Release dated
February 22, 2021). Rio Tinto also
confirmed to Star Diamond that this
bulk sample program had met Rio Tinto's objective of improving
confidence in the diamond grade of the Project. In response,
Star Diamond notified Rio Tinto that
completion of a comprehensive diamond breakage study and certain
other work remained outstanding. Rio Tinto has previously
assured Star Diamond that a
comprehensive diamond breakage study would be completed by Rio
Tinto 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'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'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 first quarter of 2021, the Company announced that Rio
Tinto commenced an eight-hole geotechnical drilling program on and
in proximity to the Orion North Kimberlite (see News Release dated
January 19, 2021). The drill rigs
utilized were 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.
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 predatory and coercive
actions of Rio Tinto.
Pleadings in the Legal Proceedings have been completed.
During March 2021, Rio Tinto and
Star Diamond each delivered their
respective affidavits of documents to the other. The other
principal pre-trial steps that remain to be completed include oral
questioning and the exchange of expert reports. 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.
During June 2021, the Court
confirmed that, notwithstanding Rio Tinto's acknowledgement that a
diamond breakage assessment was an essential part of its recent 10
cutter hole bulk sample diamond exploration program, the
Undertaking that Rio Tinto previously provided to the Court in
connection with the Legal Proceedings did not oblige Rio Tinto to
complete such diamond breakage assessment at that time.
Star Diamond is concerned that
Rio Tinto is unnecessarily delaying the completion of its diamond
breakage assessment, which Star
Diamond expects will further validate its previously
expressed concerns about Rio Tinto's use of unproven and
inadequately tested extraction and/or diamond recovery
methodologies to conduct its bulk sample program.
Star Diamond looks forward to
reviewing Rio Tinto's diamond breakage assessment as soon as it is
completed.
On July 26, 2021, Rio Tinto
purported to hold a meeting of the management committee of the
joint venture that Rio Tinto claims was previously formed between
Star Diamond and Rio Tinto. At
that meeting, representatives of Rio Tinto purported to
unilaterally approve a proposed joint venture budget for the period
from June 2021 to March 2022 of $17.8
million, and to add to that budget an aggregate of
$64.4 million allegedly spent by Rio
Tinto during 2019, 2020 and the first five months of 2021.
As previously disclosed by Star
Diamond, it believes that no joint venture has been formed
because Rio Tinto's November 2019
purported exercise of its options under the Option Agreement did
not comply with that agreement. Accordingly, Star Diamond believes that the July 26, 2021 purported meeting of the management
committee was not valid. Further, Star Diamond believes that, even if a joint
venture had been validly formed, which as stated Star Diamond does not believe is the case, the
relevant agreements do not allow Rio Tinto to include in the joint
venture budget, or otherwise recover from Star Diamond, much of the $64.4 million allegedly spent by Rio Tinto during
2019, 2020 and the first five months of 2021.
Star Diamond expects that these
issues will form part of the Legal Proceedings. To the extent
that Star Diamond does not fund its
portion of joint venture expenditures in circumstances where it is
required to do so, Star Diamond's
interest in such joint venture may be diluted.
Quarterly results
For the quarter
ended June 30, 2021, the Company recorded a
net loss of $2.0 million or $0.00 per share (basic
and fully diluted) compared to a net loss
of $1.5 million or $0.00 per share for
the same period in 2020. The
losses during these quarters were due to operating costs and
exploration and evaluation expenditures incurred
by the Company exceeding interest and other income earned
on cash and cash equivalents.
Year to Date Results
For the six months ended June 30,
2021, the Company recorded a net loss of $3.1 million or $0.01 per share (basic and fully diluted)
compared to a net loss of $2.5
million or $0.01 per share for
the same period in 2020. The losses during these six month periods
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
June
30, 2021
|
As
at
December
31, 2020
|
Current
assets
|
$
4.1 M
|
$
5.0 M
|
Exploration and
evaluation, capital and other assets
|
67.8
M
|
67.6
M
|
Current
liabilities
|
1.1
M
|
1.0
M
|
Non-current
liabilities
|
1.2
M
|
1.2
M
|
Shareholders'
equity
|
69.6
M
|
70.4
M
|
Condensed
Consolidated Statements of Loss
|
Three Months
Ended June 30,
2021
|
Three Months
Ended June 30, 2020
|
Six
Months
Ended June 30, 2021
|
Six Months
Ended June 30, 2020
|
Interest and other
income
|
$
0.0 M
|
$
0.0 M
|
$
0.0 M
|
$
0.0 M
|
Expenses
|
1.8
M
|
1.5
M
|
3.2
M
|
2.6
M
|
Investment in Wescan
Goldfields Inc.
|
(0.2) M
|
0.0
M
|
0.1
M
|
0.1
M
|
Net loss for the
period
|
2.0
M
|
1.5
M
|
3.1
M
|
2.5
M
|
Net loss per share
for the period (basic and diluted)
|
0.00
|
0.00
|
0.01
|
0.01
|
Condensed
Consolidated Statements of Cash Flows
|
Quarter Ended
June 30, 2021
|
Quarter Ended
June 30, 2020
|
Cash flows from
operating activities
|
$
(2.9) M
|
$
(2.4) M
|
Cash flows from
investing activities
|
0.0
M
|
0.0
M
|
Cash flows from
financing activities
|
1.9
M
|
0.1
M
|
Net decrease in
cash
|
(1.0) M
|
(2.3) M
|
Cash – beginning of
period
|
4.8
M
|
8.0
M
|
Cash – end of
period
|
3.8
M
|
5.7
M
|
Outlook
The provincial environmental approval of the 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
Project) 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. The Company is also very pleased to continue to
have Newmont Corporation as a significant shareholder.
As of August 12, 2021, the Company
had approximately $3.4 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 in relation to the Project, and prior
statements made by Rio Tinto and its affiliates in relation to the
Project including as referred to above, there can be no assurance
that Rio Tinto 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 may
consider relevant to its assessment of whether to do so.
About Star Diamond Corporation
Star Diamond 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 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 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 Project (See News Release dated October
25, 2018). The Canadian Environmental Assessment Agency
previously announced a positive Environmental Assessment Decision
for the 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; statements regarding
the processing and analysis of, and reporting of results from, the
bulk samples previously collected by Rio Tinto and the timeline for
doing so; statements related to diamond breakage and diamond
breakage assessments; statements related to the joint venture that
Rio Tinto claims has been formed with Star
Diamond, funding obligations of Star
Diamond under that joint venture and the consequences of
Star Diamond not meeting any of such
funding obligations; 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 Project;
statements relating to future development of the 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 or the Company, the nature and outcome of studies,
analyses, criteria or conditions that Rio Tinto 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 Court's interpretation of relevant agreements, the
counterclaim of Rio Tinto against the Company and any future legal
proceedings, the impact of the COVID-19 pandemic, risks related to
the processing methods used by Rio Tinto and the effectiveness
thereof, risks related to diamond breakage and cost overruns and
other consequences arising from Rio Tinto'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.
SOURCE Star Diamond Corporation