The joint ventures with Stellar Diamodns more specifically includes joint ventures over the Baoulé kimberlite project in Guinea, which has a resource target of approximately 3 million carats, and over two new exploration licences in western Liberia, which have recently been awarded to Stellar.
The proposed joint ventures are conditional upon completion of due diligence by Citigate – a Dubai-based commodities group – and the parties entering into definitive joint venture agreements (JVA) for each project.
“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,” says Stellar CEO Karl Smithson.
Proposed terms of Stellar Diamonds’ 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 Diamonds 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 three expenditure phases of work for the Liberia exploration licences.
The three phases is also a staged earn-in by Citigate of up to 75% of the Baoulé project which includes:
- Phase-1 expenditure of $1.5 million for 25% equity in Baoulé
- Phase-2 expenditure of $2 million for a further 25% equity in Baoulé
- Phase-3 fully fund a pre-feasibility study for a further 25% equity in Baoulé
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 $1.5 million which will comprise further trial mining of the higher grade/value eastern lobe of the 5 ha Baoulé kimberlite. Stellar completed a 100 000 t bulk sampling exercise at Baoulé in June 2016 from which total sales generated $1 228 000.
It is anticipated that a further 50 000 t 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 +1.25 mm grade of 13.3 cpht this could yield up to a further 6 600 carats for sale, however previous sales from the east lobe achieved $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 $150 000.
Should Citigate elect to progress to Phase-2 it will invest a further $2 million in order to define an independently sign off indicated mineral resource to a depth of up to 500 m.
This will require additional drilling and micro-diamond 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.
Proposed terms of the Liberia Joint Venture
Pursuant to entering into a definitive JVA, Citigate will have the right to invest $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.
Staged earn-in by Citigate of up to 85% of the Liberia licences:
- Phase-1 expenditure of US$250,000 for 25% equity in the licences
- Phase-2 expenditure of US$2 million for a further 25% equity in the licences
- Phase-3 expenditure of US$4 million for a further 35% equity in the licences
The Phase-1 programme will entail further reconnaissance and follow up stream sampling at a budgeted cost of $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 $2 million for a further 25% interest and will make a further investment of $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 Diamonds will be paid a $25 000 management fee for overseeing the Phase-1 work programme and 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 Diamonds will enter into a definitive JVA in respect to the Liberia licences.
“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,” says Smithson.
“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,” Tohib Iyiola, Citigate CEO concludes.
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.”