SASKATOON, SK,
Dec. 9, 2021 /CNW/ - Star Diamond
Corporation ("Star Diamond") and Rio Tinto are pleased to announce
that they have today entered into binding agreements that
comprehensively resolve all disputes between them. As part of
that resolution, Star Diamond and
Rio Tinto have agreed to revised joint venture arrangements that
best position the joint venture to advance the development of a
diamond mining operation on the Fort à la Corne property in
Saskatchewan, Canada.
Under these new arrangements:
- All expenditures on the project prior to December 31, 2021 will be the sole responsibility
of Rio Tinto's subsidiary, Rio Tinto Exploration Canada Inc.
("RTEC");
- All expenditures between January 1,
2022 and the public announcement of a decision to develop a
diamond mining operation, based upon the completion of a positive
feasibility study, will initially be advanced by RTEC. Star Diamond will not be required to begin
reimbursing RTEC for Star Diamond's
share of these expenditures unless and until commercial production
has been achieved. The effect of the foregoing is that Star Diamond will have no obligation to
contribute additional investment to the project until a decision to
develop the mine is made and publicly announced;
- Once the decision to develop the mine has been made and
announced, Star Diamond will have
six months to begin contributing to the joint venture Star Diamond's share of the capital costs and
expenditures required to build the mine; and
- In exchange for these amendments, the parties have agreed that
the participating interests of RTEC and Star Diamond in the joint venture have been
adjusted to 75% for RTEC and 25% for Star
Diamond (from 60% and 40%, respectively).
These arrangements de-risk the project for Star Diamond and ensure that key project
milestones, and the certainty associated with them, will have been
achieved before Star Diamond has to
contribute any additional capital, while also providing Rio Tinto
with a greater participating interest in the project. They
also align the interests of Rio Tinto and Star Diamond in moving the project forward for
the benefit of both companies and their respective
shareholders.
"This is a major step forward for the Fort à la Corne project,
Star Diamond and its
shareholders. We are very pleased to have reached a
constructive resolution with Rio Tinto that puts our differences in
the past, fully aligns our interests and allows both of us to
singularly focus on jointly and expeditiously moving forward with
what Star Diamond believes is one of
the most promising Diamond projects in the world," stated
Ewan Mason, Chair of the Board of
Star Diamond.
Rio Tinto Head of Exploration, Dave
Andrews said, "These new arrangements and our alignment with
Star Diamond represent a major
milestone in the continued development of the Fort à la Corne
property. Building on the comprehensive studies and
successful bulk sampling program on the Star Kimberlite, we are
very pleased to now be working cooperatively with Star Diamond on a diamond project that we
believe has the potential to be a significant contributor to both
the local communities around the Fort à la Corne property and the
broader Saskatchewan economy."
Details of New Arrangements
Under the arrangements
announced today, Star Diamond and
RTEC have agreed that all expenditures incurred at the Fort à la
Corne property between November 9,
2019 and December 31, 2021 are
the sole responsibility of RTEC. These expenditures are
expected to amount to approximately $77.4
million (100% basis), which is in addition to the
approximately $103.6 million spent by
RTEC at the property prior to giving notice on November 9, 2019 that it was exercising its
options to joint venture.
Expenditures incurred at the property ("carried interest costs")
from and after January 1, 2022 are to
be 100% advanced by RTEC in first instance until, among other
things: (a) the completion of a feasibility study demonstrating
that extraction of diamonds is reasonably justified (economically
mineable) and that contemplates the construction and operation of a
diamond mining operation having certain minimum requirements, (b) a
positive decision has been made to develop such mine, (c) a
development program and budget for the construction of such mine
has been approved, and (d) public disclosure has been made of the
decision to develop such mine.
Star Diamond will have no
obligation to fund or contribute to carried interest costs until
the commencement of commercial production, which will not occur
until after the completion of construction of the diamond mine with
it generally operating at certain specified thresholds for 90
days. Once commercial production has been achieved,
Star Diamond will be required to
reimburse RTEC for Star Diamond's
share (based upon its participating interest in the joint venture)
of carried interest costs by the retention by RTEC of a specified
portion of the diamonds that Star
Diamond would otherwise be entitled to receive if
Star Diamond is taking its share of
diamonds in kind, or by paying to RTEC a specified portion of the
net sale proceeds that would otherwise be received by Star Diamond from the sale of diamonds produced
at the mine, in each case until RTEC has been reimbursed for
Star Diamond's share of carried
interest costs. Such specified portion of Star Diamond's share of diamonds or net sale
proceeds, as applicable, to be used to reimburse RTEC for carried
interest costs is 50% during the first year following the
commencement of commercial production, 65% during the second year
and 80% thereafter, in each case until RTEC has been
reimbursed. Star Diamond may
prepay these amounts at any time without penalty, and any carried
interest costs that have not been reimbursed as of the first
anniversary of commercial production will bear interest at prime
plus 5%.
Once a decision to develop the mine has been made and publicly
announced, Star Diamond will have
six months before it is required to begin contributing to its share
of capital costs and expenditures incurred for construction of the
mine.
In exchange for the foregoing, the respective participating
interests of RTEC and Star Diamond
in the joint venture have been adjusted to 75% for RTEC and 25% for
Star Diamond (from 60% and 40%,
respectively).
Star Diamond has also agreed
that, prior to it entering into any agreement that will result in
the acquisition by any person of more than 50% of the shares of
Star Diamond (or any other
transaction the result of which allows any person to direct the
management and policies of Star
Diamond), RTEC will have a five-business day right to match
such acquisition proposal.
As part of the resolution arrangements, Star Diamond and RTEC have agreed to end the
litigation that has been ongoing between them and to release each
other for prior events.
The arrangements announced today were negotiated on behalf of
Star Diamond under the supervision
and direction of its special committee of non-management directors
that was formed in early 2020. Upon the recommendation
of that special committee, these arrangements were unanimously
approved by Star Diamond's board of
directors earlier today.
Copies of the Resolution Agreement and the Joint Venture
Agreement that have been entered into between Star Diamond and RTEC to give effect to these
arrangements are available under Star
Diamond's profile on SEDAR at www.sedar.com and will also be
posted in Star Diamond's website at
www.stardiamondcorp.com. The summary of the new
arrangements outlined above is qualified in its entirety by the
full text of these agreements, and reference should be made to
these agreements for their full terms and conditions.
About Star Diamond Corporation
Star Diamond is a Canadian-based corporation
engaged in the acquisition, exploration and development of mineral
properties. Shares of Star Diamond
trade on the Toronto Stock Exchange under the trading symbol
"DIAM". Star Diamond's most significant asset is its
interest in the Fort à la Corne property in central
Saskatchewan. These kimberlites are located in close
proximity to established infrastructure, including paved highways
and the electrical power grid, which provide significant advantages
for future mine development.
Caution Regarding Forward-looking Statements
This press release contains "forward-looking statements" and/or
"forward-looking information" (collectively, "forward-looking
statements") within the meaning of applicable securities
legislation. All statements, other than statements of historical
fact, are forward-looking statements. Forward-looking statements in
this press release include, but are not limited to, statements with
respect to the Fort à la Corne project, expected expenditures to be
incurred by RTEC between November 9,
2019 and December 31, 2021,
and the project's potential to be a significant contributor to both
the local communities and the broader Saskatchewan economy.
These forward-looking statements are based on Star Diamond's and Rio Tinto's current beliefs
as well as assumptions made by and information currently available
to each of them 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 prices, 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 RTEC or Star Diamond, the impact of changes in the laws
and regulations regulating mining exploration, development,
closure, judicial or regulatory judgments and legal proceedings,
operational and infrastructure risks and the additional risks
described in Star Diamond's most
recently filed Annual Information Form, annual and interim
MD&A.
Although management of Star
Diamond and Rio Tinto consider the assumptions contained in
forward-looking statements to be reasonable based on information
currently available to them, those assumptions may prove to be
incorrect. When making decisions with respect to Star Diamond, investors and others should not
place undue reliance on these statements and should carefully
consider the foregoing factors and other uncertainties and
potential events.
Star Diamond is not affirming or
adopting any statements attributed to Rio Tinto in this release or
made by Rio Tinto outside of this release. Rio Tinto is not
affirming or adopting any statements attributed to Star Diamond in this release or made by
Star Diamond outside of this
release. Star Diamond and Rio Tinto
do not undertake any obligation to release publicly revisions to
any forward-looking statement to reflect events or circumstances
after the date of this release, or to reflect the occurrence of
unanticipated events, except as may be required under applicable
securities laws. Investors should not assume that any lack of
update to a previously issued forward-looking statement constitutes
a reaffirmation of that statement. Continued reliance on
forward-looking statements is at investors' own risk.
SOURCE Star Diamond Corporation