Stellar Diamonds, the AIM-listed diamond development company focusing on West Africa, has signed joint venture (JV) agreements with Citigate Commodities Trading regarding Stellar’s Baoule kimberlite project in Guinea and two earlier stage exploration licences in western Liberia.
Stellar Diamonds has a 75% interest in the Baoule project and a 100% interest in the Liberia project. The company said on Wednesday that the joint venture agreements have attractive terms which essentially provide Stellar Diamonds with a free-carry on the projects.
The Baoule JV involves a staged earn-in by Citigate’s subsidiary, SAFA Afrique, of up to 75% of Baoule. It includes expenditure of $1.5 million for a 25% shareholding during phase 1 and expenditure of $2 million for a further 25% shareholding during phase 2.
During phase 3, Cititage will fund a pre-feasibility study for a further 25% shareholding.
Citigate has also been awarded off-take rights on goods exported during the earn-in process, while Stellar will receive 56% of gross revenues from the phase 1 trial mining and be paid a phase 1 management fee of $150 000.
Meanwhile, the Liberia joint venture stipulates that SAFA Afrique can earn up to 85% of the Liberia project by investing $250 000 for a 25% shareholding during phase 1, $2 million for a further 25% shareholding during phase 2 and $4 million for an additional 35% shareholding during phase 3.
Stellar Diamonds will be paid a management fee of $25 000 during phase 1 and will receive pro-rata revenues from diamond sales during any stage of earn-in.
Citigate has been awarded off-take rights on goods exported during the earn-in process.
In the case of both joint venture agreements, phase 1 is expected to take place over a 12-month period. If projects progress to phase 2, work is expected to take place over a two-year period with phase 3 expected to take place over three years.
Stellar Diamonds chief executive Karl Smithson said Stellar is delighted to finalise these joint ventures on terms that are highly attractive to Stellar and the company’s shareholders who will retain an ongoing interest in the projects, including a portion of revenues. Stellar’s experienced local teams will manage the programmes for at least the first phase of work, for which the company will receive a management fee.
“We expect the first phase of work to start on each project towards the end of November,” says Smithson.
“Importantly, these JVs will allow the key management of Stellar to focus on the proposed Tongo-Tonguma transaction in Sierra Leone, which we believe offers significant value potential,” he adds.
Stellar Diamonds says the combined Tongo-Tonguma project demonstrated robust economics in a preliminary economic assessment, with an estimated pre-tax project NPV(10) of US$172 million, an IRR of 49%, and projected life of mine project revenues of US$1.5 billion.
“We therefore look forward to focusing our efforts on the advancement of Tongo-Tonguma, while retaining exposure to the Baoulé and the Liberian projects,” says Smithson.