STAR - Orion South Diamond Project: Preliminary Economic Assessment Post-Tax & Royalty NPV of $2.0 Billion and IRR of 19 Percent 66 Million Carats Mined
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NEWS RELEASE April 16, 2018
TSX: DIAM Saskatoon, Saskatchewan
STAR - ORION SOUTH DIAMOND PROJECT: PRELIMINARY ECONOMIC ASSESSMENT
POST-TAX & ROYALTY NPV OF $2.0 BILLION AND IRR OF 19 PERCENT
66 MILLION CARATS MINED
Star Diamond Corporation (“Star Diamond” or the “Corporation”), is pleased to announce the positive results
of the independent Preliminary Economic Assessment (“PEA”) on the Star and Orion South Kimberlites (the
“Star - Orion South Diamond Project”, or “Project”), situated in the Fort à la Corne diamond district of central
Saskatchewan, Canada, on mineral dispositions held 100% by Star Diamond. The PEA estimates that 66 million
carats of diamonds could be recovered in a surface mine over a 38 -year Project life, with a Net Present Value
(“NPV”) (7%) of $2.0 billion after tax, an Internal Rate of Return (“IRR”) of 19% and an after-tax payback period
of 3.4 years after the commencement of diamond production.
The PEA Highlights Include 1.:
• Total potential plant feed of 470 million tonnes at a weighted average grade of 14 carats per hundred tonnes
(“cpht”), containing 66 million carats over the 34 year Life of Mine 2. (“LOM”);
• The Base Case scenario (Model diamond price) has a n NPV (7%) of $3.3 billion and an IRR of 22% before
taxes and royalties, and an after-taxes and royalties NPV (7%) of $2.0 billion with an IRR of 19%;
• The Case 1 scenario (High Model diamond price) has an NPV (7%) of $5.4 billion for an IRR of 32% before
taxes and royalties;
• Pre-production capital cost of $ 1.41 billion with a total capital cost of $ 1.87 billion (including direct, indirect
costs and contingency) over the LOM and an initial capital cost payback period of 3.4 years.
1. Cautionary note: The PEA was prepared in accordance with National Instrument 43 -101 Standards of Disclosure for
Mineral Pr ojects ("NI 43 -101"). Readers are cautioned that the PEA is preliminary in nature and includes the use of
Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the results
of the PEA will be realized.
2. Diamond-bearing kimberlite is produced from the mine and diamonds are recovered in the processing plant for 34
years. The overall project life is 38 years, which includes just over four years of pre-stripping activities.
The PEA was led by independent mining, processing and design consultants , with support from the Star
Diamond technical team. The principal consultants include: SGS Canada Inc. - Geostat (“SGS”); DRA Americas
Inc. (“DRA”) and ENG COMP Engineering and Computing Professionals Inc . (“ENGCOMP”). A number of other
independent consulting firms and potential vendors also provided their study results to Star Diamond for use
in developing the PEA. All currency amounts are quoted in Canadian Dollars, unless otherwise stated.
President and CEO, Kenneth MacNeill, states: “ The Corporation is very pleased with the positive results of the
PEA. On the shoulders of more detailed drilling and the Revised Resource Estimate of 2015, the Corporation
has taken a fresh look at the Project and has refined the mining and processing plans with exciting and positive
results. The PEA describes a lean, profitable, industry -leading plan. The Corporation’s Management and
Directors acknowledge the extensive and diligent work that has been performed by Star Diamond’s technical
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team and associated consultants to reach this important milestone in the evaluation of the Star and Orion
South Kimberlites.”
Senior Vice President Exploration and Development, George Read, states: “The positive results of the PEA
show that the Star and Orion South Kimberlites have the potential to be economically developed as a world
class diamond mine. The PEA takes advantage of improved economics using Bucket Wheel Excavators
(“BWEs”) and state-of-the-art diamond recovery processes.”
PEA Results
The PEA cash flow model is based on developing two open pits, initially on Orion South and subsequently on
Star. The cash flow model assumes one processing plant and infrastructure that will serve bot h open pits and
assumes the P roject has a four-year pre-production development period followed by a 34 year production
period. The economic criteria used in the cash flow model are listed in Table 1.
Table 1. Economic criteria used in PEA cash flow model
Area Criterion Value
Production Parameters No. of operating days per year 350 days per year
Process plant availability 87%
Processing rate 45,000 tpd kimberlite
Estimated LOM total plant feed 470 Mt mill feed at a weighted
average 14 cpht grade
Diamond Price Escalation Projected diamond price escalation 2%
Cost Assumptions Exchange rate $1.00=US$0.80
Marketing costs Average 1% of Revenue
Royalties Based on Saskatchewan
royalty regime
Operating Costs Mining (includes waste removal cost) $4.37 / tonne processed
Mill Feed processing $2.30 / tonne processed
General and Administration $2.47 / tonne processed
Contingency Initial capital cost contingency 7% of Initial Capital Cost
Abbreviations: Mt – Million metric tonnes; tpd – metric tonnes per day.
Pre-production Capital Expenditure
The pre-production capital of $1.4 billion is detailed in Table 2.
Table 2. Pre-production Capital
Area Amount
Processing Plant $350 million
Site Facilities $250 million
Overburden Stripping $74 million
Overburden Stripping Equipment $410 million
Kimberlite Mining Equipment $64 million
Other Costs $156 million
Contingency $106 million
Total $1,410 million
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Economic Analysis
The Base Case scenario uses the Model diamond price and 2% diamond price escalation, while Case 1 uses the
High Model diamond price and 2 % diamond price escalation . The economic model includes a $ 106 million
capital contingency. Pre -tax and after- tax results of the economic analysis are shown in Table 3 for
comparison.
Table 3. Economic analysis results of discounted cash flow model for Base Case and Case 1.
Item
Base Case
(Model Price)
Pre-Tax & Royalty
Case 1
(High Model Price)
Pre-Tax & Royalty
Base Case
(Model Price)
Post-Tax & Royalty
Undiscounted Net Cash Flow $18.0 Billion $26.1 Billion $11.4 Billion
NPV (5.5%) $4.6 Billion $7.3 Billion $2.9 Billion
NPV (6.0%) $4.1 Billion $6.6 Billion $2.6 Billion
NPV (6.5%) $3.7 Billion $6.0 Billion $2.3 Billion
NPV (7%) $3.3 Billion $5.4 Billion $2.0 Billion
NPV (7.5%) $3.0 Billion $4.9 Billion $1.8 Billion
NPV (8.0%) $2.7 Billion $4.5 Billion $1.6 Billion
NPV (8.5%) $2.4 Billion $4.1 Billion $1.4 Billion
IRR 22% 32% 19%
Simple Payback (years)* 3 years 3 months 2 years 4 months 3 years 5 months
* After start of processing.
Sensitivity Analysis
Economic risks were assessed using base case cash flow sensitivities to recovered grade, diamond prices,
CDN$/US$ exchange rate, capital costs and operating costs. Each of the sensitivity items were independently
adjusted up and down by 10%, 20% and 30% to project the impact on NPV (7%). The NPV (7%) value after each
sensitivity item was adjusted are presented in Table 4 . The sensitivity analysis shows that the PEA is most
sensitive to CDN$/US$ exchange rate fluctuations on the positive side while grade and diamond price have the
most significant negative effect.
Table 4. Base Case Sensitivity Analysis Results (pre-tax & royalty basis, NPV (7%))
Sensitivity Parameter 70% 80% 90% 100% 110% 120% 130%
Grade $1.6 B $2.2 B $2.7 B $3.3 B $3.9 B $4.5 B $5.1 B
Diamond Price $1.6 B $2.2 B $2.7 B $3.3 B $3.9 B $4.5 B $5.1 B
CDN$/US$ Exchange Rate $4.7 B $4.1 B $3.7 B $3.3 B $3.0 B $2.7 B $2.4 B
Capital Costs $3.6 B $3.5 B $3.4 B $3.3 B $3.2 B $3.1 B $3.0 B
Operating Costs $3.6 B $3.5 B $3.4 B $3.3 B $3.2 B $3.1 B $3.1 B
Mineral Resource Estimate
The PEA is based on the Revised Mineral Resource Estimate as documented in the NI 43-101 Technical Report:
Technical Report and Revised Resource Estimate for the Star – Orion South Diamond Project Fort a La Corne
area, Saskatchewan, Canada December 21, 2015. This report is available on the Corporation 's website
(www.stardiamondcorp.com) and on SEDAR (www.sedar.com).
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Diamond Prices
Diamond prices used in th e PEA are based on price applications by WWW International Diamond Consultants
Ltd (“WWW”) in mid-April 2018 using their March 31, 2018 price book. The Base Case scenario uses the Model
prices for each kimberlite unit within Star and Orion South. The Case 1 scenario uses High Model prices for
comparative purposes. WWW has stated that per annum rough diamond price escalation of 2.5 per cent is a
reasonable figure, given the future outlook for the rough diamond market over the next ten years. For the
purpose of the PEA Star Diamond has elected to use a more conservative diamond price escalat ion of 2%. The
details of the April 2018 valuation of the Star and Orion South diamond parcels are listed in Tables 5 and 6.
Table 5. The Parcel and Model Price Details for the Star Kimberlite (March 31, 2018)
Star
Kimberlite
Unit Carats
Parcel Price
(US$/carat)
Model
Price
(US$/carat)
Minimum
Model Price
(US$/carat)
High
Model Price
(US$/carat)
Cantuar 1,667.96 281 303 253 438
Pense 1,410.47 141 162 126 203
EJF 7,124.74 162 207 172 265
MJF-LJF 91.28 170 173 131 249
Table 6. The Parcel and Model Price Details for the Orion South Kimberlite (March 31, 2018)
Orion South
Kimberlite
Unit Carats
Parcel
Price
(US$/carat)
Model
Price
(US$/carat)
Minimum
Model Price
(US$/carat)
High
Model Price
(US$/carat)
EJF 1,400.01 126 173 118 242
Pense 581.47 81 144 101 199
Mining
Mine plan optimization determined that the optimal economic approach to the mining of the combined Star -
Orion South resources is to commence with mining Orion South, followed by mining on Star, for a total LOM of
34 years. The pit plans incorporate the geotechnical and hydrogeological design criteria developed prior to
2011.
Mining of the kimberlite is by conventional open pit. Conventional hydraulic excavators and haul trucks create
a starting “key” for three BWEs to remove the sand and clay overburden from the kimberlite. Conveyor belts
transfer the sand and clay from the BWEs to the nearby overburden waste area. The exposed kimberlite is
lightly blasted and conventional hydraulic shovels load the rock into trucks. These trucks transfer the rock to an
in-pit feeder and the kimberlite is delivered to the processing plant via conveyor belt.
Processing Plant and Infrastructure
The processing facility is favourably located near the Star and Orion South pit edges. The processing rate is
45,000 tonnes of kimberlite per day employing autogenous milling followed by screening, X-ray Transmission
(“XRT”) diamond recovery and dense media separation of heavy mineral concentrate . The recovery section
employs X -ray technology wi th grease as the scavenging technology to recover the low- luminescence
diamonds. The diamonds would be sorted into parcels within the on-site sorting facility.
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Environment Assessment
The Environmental Impact Statement (“EIS”), which describes the potential environmental and socio-economic
effects of the Project, was previously submitted to provincial and federal regulators. In December 2014, the
Canadian Environment Assessment Agency announced an Environmental Assessment Decision for the
proposed Project (See News Release dated December 3, 2014). The Federal Environment Minister
announced that the Project “is not likely to cause significant adverse environmental effects when the
mitigation measures described in the Comprehensive Study Report are taken into account.” The Corporation is
presently awaiting a decision on the EIS from the province.
Final site reclamation and closure, including the removal of site facilities, will be p erformed at the end of the
LOM in accordance with regulatory requirements . The conceptual closure plan will be based on a target end
land use of self-sustaining forest.
Community Relations
Since 2007, the Corporation has engaged with local communities and provided information updates at
meetings of the Diamond Development Advisory Committee ("DDAC"). The DDAC is a community -based
committee comprised of approximately two dozen representatives of cities, towns, villages, rural
municipalities and Indigeno us parties in the vicinity of the Fort à la Corne forest. Additionally , the general
public has been widely consulted through forums such as community open house meetings conducted by the
Corporation, with local communities showing overwhelming support for the Project. A description of extensive
community engagement activities forms part of the EIS . Development of a mine will bring substantial
economic development to communities in the surrounding region . The proposed Project is expected to
provide direct e mployment for hundreds of people throughout the construction phase and in excess of 500
people continuously over its 38 year life.
Technical Report
For readers to fully understand the information in this news release, they should read the PEA technical report
in its entirety. The Corporation expects to file the report on SEDAR (www.sedar.com) in accordance with NI 43-
101, within 45 days from the date of this news release . The report will be available at that time on th e
Corporation’s website, including all qualifications, assumptions and exclusions that relate to the PEA. The
technical report is intended to be read as a whole, and sections should not be read or relied upon out of
context.
Qualified People
The PEA was authored by the following independent qualified people: W. Douglas Roy, Senior Associate
Mining Engineer for SGS, a registered Professional Engineer in the Province of Nova Scotia; Daniel Leroux,
Global Business Manager – Geological and Mining Services for SGS, a registered Professional Geoscientist in
the Provinces of Ontario and Saskatchewan ; Lehman van Niekerk , Senior Process Engineer, DRA Projects SA
(Pty) Ltd, a registered Professional Engineer with the Engineering Council of South Africa and member of The
Southern African Institute of Mining and Metallurgy; and Geoffrey Wilkie, Senior Cost Consultant ENGCOMP, a
registered Professional Engineer in the Province of Saskatchewan.
Risks and Opportunities
As with all mining ventures, a large number of risks and opportunities can affect the outcome of the Project.
Most of these risks and opportunities are based on uncertainty, such as less detailed scientific information
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(test results, drill results, etc.) or the lack of control over external factors ( diamond prices, exchange rates,
etc.). Subsequent higher -level engineering studies would be required to further refine these risks and
opportunities, identify new risks and opportunities, and def ine strategies for risk mitigation or opportunity
implementation
The PEA identified principal risks for the Project which are summarized below:
• Geological interpretation and mineral resource classification (17% of the mineral resources used in the
mine plan are Inferred mineral resources);
• Geotechnical and hydrogeological considerations;
• Construction management and cost containment during development of the Project;
• Increased operating cost and/or capital cost; and
• Reduced diamond prices.
Several potential opportunities to improve the accuracy of the results of the Project contemplated under the
PEA have been identified. Examples include, but may not be limited to:
• Expansion of the Star and Orion South resources through drilling. Addition of further resources
through drilling has the potential to add resources and increase LOM and economics;
• More refined pit optimization parameters could result in better optimized open pit limits than the pit
shell selected for the PEA;
• Improved hydrogeological and geotechnical understanding may increase pit slope angles over those
used in the PEA;
• Investigate other mining methods that would lead to a decreased cost;
• Further metallurgical testing and refining milling processes may result in improved recoveries;
• The potential to upgrade the mineral resource classification of the deposit; and
• Improved diamond prices.
About Star Diamond Corporation
Star Diamond Corporation is a Canadian based corporation engaged in the acquisition, exploration and
development of mineral properties. Shares of the Co rporation trade on the TSX Exchange under the trading
symbol “DIAM”. The Corporation’s Star - Orion South Diamond Project is located in central Saskatchewan some
60 kilometres east of the city of Prince Albert. The Project is in close proximity to established infrastructure,
including paved highways and the electrical power grid, which provide sign ificant advantages for future mine
development.
All technical information in this press release has been prepared under the supervision of George Read, Senior
Vice-President of Exploration and Development, a registered P rofessional Geoscientist in the Provinces of
Saskatchewan and British Columbia; Mark Shimell, Project Manager, a registered Professional Geoscientist in
the Province of Sas katchewan; and William van Breugel, Mine Project Engineer, a registered Professional
Engineer in the Province of Saskatchewan, who are the Corporation’s “Qualified Persons” under the definition
of NI 43-101.
Star Diamond commissioned the PEA and related Technical Report for the Star and Orion South Kimberlites
and, as such, the PEA and Technical Report are the sole responsibility of the Corporation. The PEA is based on
exploration and evaluation work conducted up to and including March 2017.
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Caution Regarding Forward-Looking Statements
This news release contains forward -looking statements as defined by certain securities laws, including the "safe harbour"
provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995.
Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe",
"expect", "plan", "intend", "forecast", "target", "project", "guidance", "may", "will", "should", "could", "estimate",
"predict" or similar words suggesti ng future outcomes or language suggesting an outlook. In particular, statements
regarding the Corporation's future operations, future exploration and development activities or other development plans
constitute forward-looking statements. B y their nature, statements referring to mineral reserves, mineral resources , PEA
or TFFE constitute forward-looking statements.
Forward-looking statements in this press release include, but are not limited to , disclosure regarding the economics and
project parameters presented in the PEA, including, without limitation, IRR, NPV and other costs and economic
information, carats of diamonds to be recovered, pre- tax payback period, tonnes of kimberlite to be mined, carats per
tonne to be recovered (grade), diamond prices, life of mine, capital costs, length of pre -production period and all data in
Tables 1 through 6, possible events, conditions or financial performance that is based on assumptions about future
economic conditions and courses of action; the timing and costs of future development and exploration activities on the
Corporation's projects; success of development and exploration activities; permitting time lines and requirements; time
lines for further studies; planned exploration and development of properties and the results thereof; and planned
expenditures and budgets and the execution thereof as well as statements with respect to the Corporation ’s objectives
for the ensuing year.
These forward -looking statements are based on the Corporation's current beliefs as well as assumptions made by and
information currently available to it and involve inherent risks and uncertainties, both general and specific.
Risks exist that forward -looking statements wi ll not be achieved due to a number of factors including, but not limited to,
developments in world diamond markets, changes in diamond prices, risks relating to fluctuations in the Canadian dollar
and other currencies relative to the US dollar, changes in exploration, development or mining plans due to exploration
results and changing budget priorities of the Corporation or its partners, the effects of competition in the markets in
which the Corporation operates, the impact of changes in the laws and regula tions regulating mining exploration,
development, closure, judicial or regulatory judgments and legal proceedings, operational and infrastructure risks and the
additional risks described in the Corporation's most recently filed Annual Information Form, annual and interim MD&A.
The Corporation's anticipation of and success in managing the foregoing risks could cause actual results to differ
materially from what is anticipated in such forward-looking statements.
Although management considers the assumptions contained in forward -looking statements to be reasonable based on
information currently available to it, those assumptions may prove to be incorrect. When making decisions with respect
to the Corporation, investors and others should not place undue relianc e on these statements and should carefully
consider the foregoing factors and other uncertainties and potential events. Unless required by applicable securities law,
the Corporation does not undertake to update any forward-looking statement that is made herein.
For further information: [email protected] or (306) 664-2202
www.stardiamondcorp.com
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