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.
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.
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.