TIDMSTEL
RNS Number : 4564F
Stellar Diamonds PLC
28 July 2016
NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION
TO US NEWS WIRE SERVICES.
28 July 2016
AIM: STEL
Stellar Diamonds plc
("Stellar" or the "Company")
Proposed Joint Ventures in Guinea and Liberia with Significant
Earn-in Investment for Development
Stellar Diamonds plc, the London listed (AIM: STEL) diamond
development company focused on West Africa, is pleased to announce
that it has signed binding heads of terms with Citigate Commodities
Trading ("Citigate"), a Dubai based commodities group, to formulate
joint ventures over the Baoulé kimberlite project ("Baoulé") in
Guinea, which has a resource target of approximately 3 million
carats, and over two new exploration licences in western Liberia
("Liberia Licences"), which have recently been awarded to Stellar.
The proposed joint ventures remain conditional upon completion of
due diligence by Citigate and the parties entering into definitive
joint venture agreements ("JVA") for each project.
Highlights of proposed Baoulé Joint Venture:
-- Staged earn-in by Citigate of up to 75% of the Baoulé project
o Phase-1 expenditure of US$1.5 million for 25% equity in
Baoulé
o Phase-2 expenditure of US$2 million for a further 25% equity
in Baoulé
o Phase-3 fully fund a pre-feasibility study for a further 25%
equity in Baoulé
-- Stellar to be paid an up-front Phase-1 management fee of US$150,000 on signing full JVA
-- Stellar to receive 56.25% of gross revenues from Phase-1 trial mining
-- Citigate awarded off-take rights on goods exported during the Citigate earn-in process
Highlights of proposed Liberia Joint Venture:
-- Two new exploration licences recently awarded to Stellar
-- Licences cover areas previously explored by Stellar in 2006/7
which returned positive results
-- Staged earn-in by Citigate of up to 85% of the Liberia licences
o Phase-1 expenditure of US$250,000 for 25% equity in the
licences
o Phase-2 expenditure of US$2 million for a further 25% equity
in the licences
o Phase-3 expenditure of US$4 million for a further 35% equity
in the licences
-- Stellar to be paid an up-front Phase-1 management fee of US$25,000 on signing of full JVA
-- Stellar to receive pro-rata revenues from any diamond sales during any phase of earn-in
-- Citigate awarded off-take rights on goods exported during the Citigate earn-in process
Stellar Chief Executive Karl Smithson commented:
"The terms of the joint ventures are highly attractive to
Stellar in that we have essentially secured a free carried interest
at both Baoulé and our new Liberian licences. Importantly, we will
receive a proportion of revenues from on-going trial mining at
Baoulé at zero cost and have an up-front payment for managing the
projects during the first phase of work. These joint ventures allow
the key management of Stellar to focus efforts on the development
of our high-grade Tongo project in Sierra Leone as we progress
towards the mining phase, whilst retaining equity positions in both
the Baoulé and Liberia projects."
Citigate Chief Executive Tohib Iyiola commented:
"Adding the Guinean and Liberian joint venture agreements to
Citigate's portfolio gives us substantial leverage in the Gulf
Cooperation Council by securing additional assets in two of West
Africa's most prolific diamond producing nations. With one mining
project already in trial mining production, Citigate is working to
rapidly expand its portfolio of projects for its West African
diamond operator, Safa Afrique, to develop and flourish."
Proposed terms of the Baoulé Joint Venture
Pursuant to entering into a definitive JVA, Citigate will have a
staged earn-in of up to 75% of the equity in Ressources Tassiliman
Baoulé ("RTB"), which holds the Baoulé kimberlite project. Stellar
currently holds 75% of RTB with the local partner holding the
remaining 25%. Both Stellar and its local partner will dilute to
25% of the project equity should Citigate fully fund all three
phases of work. Should Citigate progress to fund Phase-3 of the
works Stellar's equity position in relation to the Baoulé project
will fall to 18.75% (i.e. 75% of 25%).
Citigate will fund Phase-1 at a budgeted cost of US$1.5 million
which will comprise further trial mining of the higher grade/value
eastern lobe of the 5 hectare Baoulé kimberlite. Stellar completed
a 100,000 tonne bulk sampling exercise at Baoulé in June 2016 from
which total sales generated US$1,228,000. It is anticipated that a
further 50,000 tonnes of kimberlite will be mined and processed in
order to determine with more accuracy the diamond grade and value
of the east lobe. At the current +1.25mm grade of 13.3cpht this
could yield up to a further 6,600 carats for sale. Previous sales
from the east lobe achieved US$156 per carat in May 2015.
During this phase of work, Stellar's experienced team on site
will manage the trial mining programme and Stellar will be paid an
up-front management fee of US$150,000. Furthermore, all revenues
from this phase of trial mining will be split pro-rata to the joint
venture partner's interest. Therefore, during the Phase-1 programme
Stellar will receive 56.25% of gross revenues (being 75% of 75%
interest), with the existing local partner receiving 18.75% and
Citigate 25%.
Should Citigate elect to progress to Phase-2 it will invest a
further US$2 million in order to define an independently signed off
indicated mineral resource to a depth of up to 500m. This will
require additional drilling and microdiamond sampling of the pipe
with the full programme to be determined at the end of Phase-1.
The Phase-3 programme earn-in requires Citigate to fully fund a
pre-feasibility level study, the details of which will be
established with a reputable and independent consulting
company.
As part of the joint venture terms Citigate will have the right
to purchase all diamonds produced during the earn-in period.
The Baoulé Joint Venture is conditional upon, inter alia, the
completion of Citigate's due diligence investigations and the
parties successfully entering into a JVA. Accordingly, there is no
guarantee that Stellar will enter into a definitive JVA in respect
to the Baoulé kimberlite project. Citigate has just completed a
site visit to Baoulé as part of the due diligence process.
Proposed terms of the Liberia Joint Venture
In late February 2016 Stellar was awarded two licences covering
a total area of 670.54 square kilometres in the west of Liberia,
around the key diamond area of Kumgbo towards the border with
Sierra Leone. Stellar had previously conducted reconnaissance
stream sampling in the region in 2006/7 which returned positive
results with some samples yielding abundant kimberlitic ilmenite,
suggesting proximal kimberlite sources. Stellar currently holds a
90% interest in the licences with its local partner holding the
remaining 10%. Stellar originally applied for these licences in
2014 and paid the licence fees of US$43,500 at that time. Since the
licences were approved a low cost re-evaluation of the historical
results has been undertaken.
Pursuant to entering into a definitive JVA, Citigate will have
the right to invest US$6,250,000 over three separate phases in
return for an 85% interest in the Liberia Licences, leaving Stellar
with a 13.5% equity interest (i.e. 90% of 15%) and the local
partner with a 1.5% interest. The Phase-1 programme will entail
further reconnaissance and follow up stream sampling at a budgeted
cost of US$250,000 and will earn Citigate a 25% interest in the
Liberia Licences. Should Citigate elect to progress to Phase-2 of
the programme it will invest a further US$2 million for a further
25% interest and will make a further investment of US$4 million at
Phase-3 of the programme for an additional 35% interest. All work
programmes for Phase-2 and Phase-3 will be determined based on the
on-going results and objectives.
Stellar will be paid a US$25,000 management fee for overseeing
the Phase-1 work programme. Citigate will also have similar offtake
rights as described above in respect to the Baoulé project.
The Liberia Joint Venture is conditional upon, inter alia, the
completion of Citigate's due diligence investigations and the
parties successfully entering into a JVA. Accordingly, there is no
guarantee that Stellar will enter into a definitive JVA in respect
to the Liberia Licences.
Further announcements in respect of the proposed joint ventures
in Guinea and Liberia will be made in due course in the event that
the Company enters into definitive JVA's.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
About Citigate
Citigate Commodities Trading Limited is a subsidiary of Citigate
International Limited, a UAE-based international group led by
entrepreneur and founder Tohib Iyiola. Citigate Commodities Trading
Limited-via Safa Afrique Limited, a diamond exploration and
development company, which functions as the group's nominee company
and which has been appointed to develop and operate West Africa's
diamond resources-has exploration assets in Sierra Leone, currently
coordinated by SRK Consulting, and also specialises in the supply
of raw commodities, gold and diamonds in particular, to
manufacturing and retail groups.
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 27 years'
experience.
About Stellar Diamonds plc
Stellar is an AIM quoted (AIM: STEL) West African focused
diamond company with projects at the trial mining and mine
development stages in Guinea and Sierra Leone.
**S **
For further information contact the following or visit the
Company's website at www.stellar-diamonds.com.
Karl Smithson, Stellar Diamonds plc Tel: +44 (0)
CEO Stellar Diamonds plc 20 7010 7686
Philip Knowles, Tel: +44 (0)
CFO 20 7010 7686
Jon Belliss Beaufort Securities Tel: +44 (0)
David Lawman Limited (Joint Broker) 20 7382 8300
Daniel Stewart & Company Tel: +44 (0)
(Joint Broker) 20 7776 6574
Emma Earl Cairn Financial Advisers Tel: +44 (0)
Sandy Jamieson (Nominated Advisor) 20 7148 7900
Lottie Brocklehurst St Brides Partners Tel: +44 (0)
Charlotte Ltd 20 7236 1177
Heap
This information is provided by RNS
The company news service from the London Stock Exchange
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