TIDMSTEL
RNS Number : 6114D
Stellar Diamonds PLC
28 April 2017
NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION
TO US NEWS WIRE SERVICES.
28 April 2017
AIM: STEL
Stellar Diamonds plc
("Stellar" or the "Company")
Tribute Mining Agreement Signed over Tongo-Tonguma, Sierra
Leone
Stellar Diamonds plc, the London quoted diamond exploration and
development company focused on West Africa, announces that it has
signed a legally binding conditional Tribute Mining Agreement and
Revenue Share Agreement ("the Agreements") with Octea Mining
Limited ("Octea") in respect of the Tongo-Tonguma kimberlite
diamond project ("Project") in eastern Sierra Leone.
Background and Highlights of the Agreements and the Project:
-- Deal creates the potential for substantial near and long term cash flows for Stellar
-- Project hosts one of the highest value kimberlite ore bodies
in Africa on a dollar per tonne basis and would create the second
largest kimberlite diamond mine in West Africa
-- Agreements allow for mining the combined and contiguous Tongo and Tonguma concessions
-- Robust attributable potential post-tax Project NPV(8) and IRR
of US$104 million and 31% respectively(1)
-- Modest mine development CAPEX in first two years estimated at
US$32 million (including 15% contingency)
-- Estimated 21 year mine life, producing over 4.5 million
carats with estimated revenues over US$1.5 billion(1)
-- Project at full production estimated to generate US$45 million gross revenue per annum(2)
-- Resource statements, mine plan, financial model, CPR, all
completed by independent consultants
-- 10% share of gross revenues (after deduction of Government
royalty) payable to Octea on diamond and other minerals recovered
and sold, once Stellar has recouped an amount equal to its CAPEX
investment and Octea has received an initial revenue share payment
of US$5 million
-- Stellar to make a one-off payment of US$5.5 million to Octea
five years after Project mine development commences
-- On completion, Stellar will acquire a 50tph kimberlite
processing plant from Octea for a nominal amount in order to fast
track production
-- Stellar's has invested US$7.2 million to date on establishing
resources at Tongo, equivalent to approx. GBP0.14 per Stellar
share
(1) Company estimates based on the preliminary economic
assessment. Assumes the Agreements remain in place for the
estimated lift of the mine.
(2) 200,000 carats per annum at a weighted average value of
US$229 per carat, with full production estimated approximately
three years after development commences
Chief Executive Karl Smithson commented:
"We are delighted to have signed these agreements with Octea
which, subject to completion, will allow Stellar to build a single
mine for the simultaneous commercial production from the contiguous
Tongo (Stellar) and Tonguma (Octea) kimberlite deposits. The
combined project has an initial 4.5 million carat resource which,
due to the high grade (100cpht to 260cpht at +1.18mm) and high
quality diamonds (US$209/ct to US$310/ct), is considered to be one
of the highest value kimberlite ore bodies in Africa on a dollar
per tonne basis. The 21 year mine plan with a consistent output of
over 200,000 carats per year at full production would quantify this
development as the second largest kimberlite diamond mine in West
Africa. The project also has a very modest two year capital
requirement of just under US$32 million to get into full scale
commercial production. Stellar has the strong support of all main
stakeholder groups in Sierra Leone for this mine development, which
would have a very positive impact in terms of employment, local
infrastructure development and future taxation revenue for the
country."
The technical information in relation to the proposed combined
Tongo-Tonguma mine plan previously reported in announcements dated
5 October 2016, in respect of the preliminary economic assessment
("PEA") and mine plan, and 31 October 2016, in respect of the
Competent Persons Reports ("CPR"), remains unchanged.
Tribute Mining and Revenue Share Agreements
The Company signed the binding Tribute Mining Agreement and
Revenue Share Agreement with Octea on 27 April 2017. The terms of
the Agreements are materially the same as those in the Heads of
Terms, as announced on 20 February 2017. Completion of the
Agreements remain subject to inter alia, valid licence opinions
being obtained for the Tongo and Tonguma licences, any encumbrance
over the Tonguma company or assets being lifted; the parties (each
acting reasonably) being satisfied that Stellar shall receive
sufficient monies to finance the Front End Engineering Design
(FEED) stage of the Mine Plan ("Initial Financing Condition")
(together "Completion"). If the conditions have not been satisfied
or waived by 30 June 2017 (or such later date as may be agreed by
both parties) the Agreements may be terminated. The first elements
of mine development are planned and pursuant to the Agreements, are
required to commence within three months of Completion. In the
event that Completion does not occur and the Initial Financing
Condition has not been met, Stellar will be obliged to pay certain
costs to Octea which, if incurred, are expected to be in the region
of approximately US$150,000.
Following Completion, Octea will continue to hold the Tonguma
mining licence through its subsidiary company Tonguma Ltd (the
legal holder of the Tonguma licence) and Stellar will continue to
wholly own its adjacent Tongo licence and subsidiary company Sierra
Diamonds Limited. Stellar will also own certain infrastructure and
capital items procured and utilised for the mine development on
both licences.
Octea has agreed that for so long as the Tribute Mining
Agreement is in place, it will not sell Tonguma Ltd or the Tonguma
licence to a third party. The Tribute Mining Agreement however
includes termination clauses whereby the agreement can be
terminated by either party for breach of the agreement.
Shareholders should note that in the event of termination, Stellar
would have no rights over Tonguma Ltd or the Tonguma licence save
for any contractual rights accrued and, depending on the
circumstances, may be obligated to pay certain costs to Octea,
which in the event of a breach of the Tribute Mining Agreement by
Stellar, may include, inter alia, the transfer back to Octea of the
Tonguma processing plant.
Once Stellar has recouped its development capital, Octea has a
right of a put option ("Put") for Stellar to purchase its revenue
share, such value to be agreed upon by independent experts if Octea
and Stellar cannot agree on the Put valuation.
Having taken local tax advice in Sierra Leone, and following
Completion, Stellar and Octea intend to create an unincorporated
joint venture between Tonguma Ltd and Sierra Diamonds Ltd to
account for their respective share of costs and revenues to comply
with local tax law. This is not expected to change the contractual
rights and responsibilities of each party pursuant to the
Agreements. Diamonds, however, will be exported and sold on the
international market by Stellar and using reputable third party
diamond marketing groups.
Review by Competent Person
This announcement has been reviewed by Karl Smithson, Chief
Executive of Stellar, a qualified geologist and Fellow of the
Institute of Materials, Metals, Mining, with 28 years'
experience.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identi ed by their use of terms and phrases such as "believe",
"expect", "could", "should" "envisage", "estimate", "intend",
"may", "plan", "potentially", "will" or the negative of those,
variations or comparable expressions, including references to
assumptions. These forward looking statements are not based on
historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of
operations, performance, future capital and other expenditures
(including the amount, nature and sources of funding thereof),
competitive advantages, business prospects and opportunities. Such
forward looking statements re ect the Directors' current beliefs
and assumptions and are based on information currently available to
the Directors.
A number of factors could cause actual results to differ
materially from the results discussed in the forward looking
statements including, but not limited to, Completion not occurring,
the Tribute Mining Agreements being terminated before the end of
the Project mine life, recoverability of diamonds not being as
expected, risks associated with vulnerability to general economic
and business conditions, competition, environmental and other
regulatory changes, actions by governmental authorities, the
availability of capital markets, reliance on key personnel,
uninsured and underinsured losses and other factors, many of which
are beyond the control of the Company. Although any forward looking
statements contained in this announcement are based upon what the
Directors believe to be reasonable assumptions, the Company cannot
assure investors that actual results will be consistent with such
forward looking statements. Accordingly, readers are cautioned not
to place undue reliance on forward looking statements. Subject to
any continuing obligations under applicable law or any relevant AIM
Rule requirements, in providing this information the Company does
not undertake any obligation to publicly update or revise any of
the forward looking statements or to advise of any change in
events, conditions or circumstances on which any such statement is
based.
About Stellar Diamonds plc
Stellar is an AIM listed (AIM: STEL) West African focused
diamond company with projects at the trial mining and mine
development stages in Guinea and Sierra Leone.
Karl Smithson, Stellar Diamonds plc Tel: +44 (0) 20
CEO Stellar Diamonds plc 7010 7686
Philip Knowles, Tel: +44 (0) 20
CFO 7010 7686
Emma Earl Cairn Financial Advisers Tel: +44 (0) 20
Sandy Jamieson (Nominated Adviser) 7213 0880
Jon Bellis Beaufort Securities Tel: +44 (0) 20
Limited (Joint Broker) 7382 8300
Martin Lampshire Peterhouse Corporate Tel: +44 (0) 20
Finance (Joint Broker) 7469 0930
Rory Scott Mirabaud Securities
(Financial Advisers) Tel: +44 (0) 20
7878 3360
Lottie Brocklehurst St Brides Partners Tel: +44 (0) 20
Charlotte Ltd 7236 1177
Page (Financial PR)
** ENDS **
For further information contact the following or visit the
Company's website at www.stellar-diamonds.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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