AIM-listed Stellar Diamonds has agreed a proposed transaction with Octea Mining Limited (part of Beny Steinmetz’s BSG Resources) – to combine Stellar’s Tongo kimberlite diamond project in Sierra Leone with Octea’s adjacent kimberlite diamond project, Tonguma, and to bring both assets into production under the same production infrastructure. The deal is dependent, among other things, on Stellar raising a minimum of US$25 million to fund the combined projects into production.
Loading ore into the Tongo plant as part of bulk sampling operations (photo: Stellar Diamonds).
“The proposed transaction, if completed, will be transformational for Stellar and its shareholders,” comments Stellar’s Chief Executive, Karl Smithson. “Once in production the combined diamond mining operations will be the second largest in West Africa with an estimated maximum output at full production of approximately 250 000 carats per year of high value diamonds. The high grade and high value nature of the kimberlites to be mined are compelling and the combination of operations should provide meaningful cost synergies that will enhance Stellar’s projected operational margins. Using the available infrastructure at Tongo and Tonguma, we expect diamond mining operations to commence within the first 12 months post completion of the proposed transaction.”
Adds Octea’s General Manager, Christo Swanepoel: “We are very excited to be combining Octea’s Tonguma project with Stellar’s Tongo project and bring the enlarged project into production under Stellar’s operational management. Stellar has long-standing expertise in Sierra Leone and the Tongo region in particular, which we believe will be of great benefit to the project. In addition, the enlarged project should significantly increase local skilled employment for many years to come which in turn will support the local economy as well as generate significant funds for the Sierra Leonean government.”
Stellar’s Tongo project has a JORC inferred resource of 1,45 million carats at a grade of 165 cpht. The current mine plan for Tongo assumes a conservative lower grade of 120 cpht with an average diamond value of US$270 per carat.
The Tonguma project comprises a 25-year mining licence covering an area of 124 km2 in the Lower Bambara Chiefdom, Kenema District, in the Eastern Province of Sierra Leone. The Tonguma project is adjacent to and contains the on-strike continuation of the diamondiferous kimberlite dykes which are being explored by Stellar within its Tongo project.
Octea has undertaken extensive exploration activities at Tonguma including over 58 000 m of diamond drilling as well as bulk sampling which has produced approximately 7 250 carats of which over 3 500 carats has been used for diamond valuation. An independent JORC inferred resource of 3,45 million carats has been estimated at grades of up to 290 cpht and average diamond values of US$193 per carat, to a maximum depth of 200 m.
Given the close proximity of the two projects, the transaction, if completed, should allow Stellar to undertake both surface and underground mining across both licences. It is envisaged that processing would be undertaken centrally, utilising an existing 50 t/h production plant which will be relocated to the project area from Octea’s Koidu mine, approximately 60 km north of Tonguma.
The initial capital outlay for Tongo as a standalone project has previously been reported by Stellar at an estimated US$25 million. Independent consultants Paradigm Project Management (PPM), who together with SRK Consulting, are preparing the combined Tongo/Tonguma mine plan, estimate the initial capital requirements at approximately US$40 million (excluding working capital) to establish production for the combined project.
