STAR Diamond Corporation Announces 2020 Year End Results
NEWS RELEASE March 30, 2021
TSX: DIAM Saskatoon, Saskatchewan
STAR DIAMOND CORPORATION ANNOUNCES 2020 YEAR END RESULTS
Star Diamond Corporation (“DIAM”, “Star Diamond” or the “Company”) reports that the audited results of its
operations for the year ended December 31, 20 20 will be filed today on SEDAR and may be viewed at
www.sedar.com once posted. A summary of key financial and operating results is as follows:
Highlights
- Announced the initial results from the processing of bulk samples by Rio Tinto Exploration Canada Inc. (“Rio
Tinto Canada”) from its 10 trench cutter hole program conducted in 2019 on the Company’s Star and Orion
South Kimberlites (the “Star - Orion South Diamond Project”, or the “Project”)
- Announced Rio Tinto Canada ’s confirmation to Star Diamond that this bulk sample program had met Rio
Tinto Canada’s objective of improving confidence in the diamond grade of the Project
- Advanced the legal proceedings commenced by Star Diamond against Rio Tinto Canada arising out of the
purported exercise in November 2019 by Rio Tinto Canada of its four options under the Option to Joint
Venture Agreement dated June 22, 2017 (the “Option Agreement”)
- Announced microdiamond results from Rio Tinto Canada’s drilling on the Orion North kimberlite cluster,
which contained two macrodiamonds, the largest being a 0.552 carat fragment
- Announced a geotechnical drilling program by Rio Tinto Canada on the Orion North kimberlite cluster
- Working capital of $4.0 million at December 31, 2020
- Issued and outstanding shares of 438.7 million at December 31, 2020
Overview
Star Diamond Corporation is a Canadian natural resource company focused on explo ring and developing
Saskatchewan’s diamond resources. In June 2017, the Company announced that it had acquired from Newmont
Corporation all of its participating interest in the Fort à la Corne joint venture, resulting in the Company owning
100% of the Fort à la Corne mineral properties (including the Project), and concurrently entered into the Option
Agreement with Rio Tinto Canada pursuant to which the Company granted Rio Tinto Canada an option to earn up
to a 60% interest in the Company’s Fort à la Corne mineral properties (including the Project) on the terms and
conditions contained in the Option Agreement (see News Release dated June 23, 2017).
In November 2019, Star Diamond received notice from R io Tinto Canada advising that R io Tinto Canada was
purporting to exercise all four of its options under the Option Agreement (see News Release dated November 15,
2019). In February 2020, the Company notified Rio Tinto Canada that its purported exercise of its four options
under the Option Agreement did not comply with the terms of the Option Agreement (see News Release dated
February 18, 2020) . In March 2020, the Company announced that it had commenced legal proceedings in the
Court of Queen’s Bench for Saskatchewan (Judicial Centre of Saskatoon) (the “Court”) against Rio Tinto Canada
(the “Legal Proceedings”) in relation to R io Tinto Canada’s purported exercise of its options under the Option
Agreement (see News Release dated March 5, 2020).
Activities relating to the Star - Orion South Diamond Project and Fort à la Corne mineral properties
During 2019, t he Company announced that R io Tinto Canada completed the drilling of ten bulk sample holes
(trenches) on the Company’s Star Kimberlite using the Trench Cutter Sampling Rig. These ten trench cutter holes
included a total of 2,351 metres of trench cutter drilling and intersected a total of 1,215.5 m etres of kimberlite.
Kimberlite was pumped to the surface and recovered using a Kimberlite Separation Unit, with samples loaded
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and stored in cubic metre bulk bags. As the on -site bulk sample plant (the “BSP”) was not constructed or
commissioned by R io Tinto Canada prior to the completion of the ten trench cutter holes, R io Tinto Canada
established a storage area where 6,848 bulk sample bags were stored by R io Tinto Canada on-site until the BSP
was fully constructed and commissioned.
During the second quarter of 2020, the Company announced that R io Tinto Canada had commenced the
processing of bulk samples from Rio Tinto Canada ’s trench cutter program on the Star Kimberlite ( see News
Release dated April 23, 2020). The mineral concentrates produced by the BSP were shipped by R io Tinto Canada
to an off-site facility for diamond recovery and reporting of such recovery to Star Diamond and Rio Tinto Canada.
The initial results from the ten trench cutter holes have now been reported by Star Diamond.
During February 2021, Rio Tinto Canada provided written notice to Star Diamond that Rio Tinto Canada had
successfully completed the ten trench cutter hole bulk sample program excavated by Rio Tinto Canada in 2019
at the Project (see News Release dated February 22, 2021). Rio Tinto Canada also confirmed to Star Diamond that
this bulk sample program had met Rio Tinto Canada’s objective of improving confidence in the diamond grade of
the Project . A s well, R io Tinto Canada stated that it had completed the processing, diamond recovery and
reporting of all diamond results on the ten trench cutter holes . In response, Star Diamond notified Rio Tinto
Canada that completion of a comprehensive diamond breakage study and certain other work remain s
outstanding. Star Diamond also notified Rio Tinto Canada that, until the comprehensive diamond breakage study
and that other work is completed, the processing, diamond recovery and reporting of all diamond results from
the ten cutter hole bulk sample program will not be complete. Rio Tinto Canada has previously assured Star
Diamond that a comprehensive diamond breakage study would be completed by Rio Tinto Canada as part of the
bulk sample program.
The initial results from the ten reported trenches continue to validate the grades outlined in the Company’s
independent Preliminary Economic Assessment (“ PEA”) that was based upon Star Diamond’s own prior
underground bulk sampling and large diameter drilling programs. The recovery of larger diamonds from Rio Tinto
Canada’s bulk sample program, including larger Type IIa diamonds, also continues to strengthen the expectation
for recovery of large, high value diamonds in a future producing diamond mine. However, as previously disclosed
by Star Diamond, the Company believes that Rio Tinto Canada’s extraction and diamond recovery methodologies,
including its use of unproven civil engineering trenching technologies to conduct bulk sampling of Kimberlite,
caused undue diamond breakage, resulted in significant unnecessary cost overruns and materially damaged Star
Diamond’s interest in the Project. Comprehensive diamond b reakage studies are required to assess the nature,
extent and potential causes of the diamond breakage, and the possibility that larger diamonds would have been
recovered absent such breakage.
During the second quarter of 2020, the Company also announced that Rio Tinto Canada provided the Company
with microdiamond results from the PQ3 (83 millimetre) core hole 120FB001, which R io Tinto Canada drilled in
November of 2019 ( see News R elease dated May 11, 2020) . This hole was drilled on the Company’s K120
Kimberlite, which forms part of the Orion North kimberlite cluster. The Company noted that the microdiamond
results provided to Star Diamond contained two macrodiamonds, the largest weighing 0.552 carats. This 0.552
carat diamond fragment has been br oken from a larger stone. The occurrence of a 0.552 carat diamond in a
microdiamond sample is anomalous and speaks to the potential for a coarse diamond size frequency distribution
and also supports previous evaluation work conducted by Star Diamond on the Orion North Kimberlites. The
results from Rio Tinto Canada’s drill program also highlights the evaluation potential of the extensive volumes of
kimberlite that are outside of the Project.
The Company recently announced that Rio Tinto Canada commenced an eight-hole geotechnical drilling program
on and in proximity to the Orion North Kimberlite in early January 2021 ( see News Release dated January 19,
2021). The drill rigs being utilized are capable of sonic drilling to obtain representative sa mples of the glacial
overburden and core drilling for the underlying kimberlite or host rock sediments. Star Diamond has been advised
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that the aim of this drilling is to investigate the geotechnical properties of the overburden, kimberlite and host
rock sediments, with this information to be used for future open pit design. Parts of the Orion North Kimberlite
have shallower overburden (of approximately 95 metres) than both the Star and Orion South Kimberlite.
On December 30, 2020, the Company completed a f low-through private placement financing whereby
approximately 5.56 million flow-through Units where issued for proceeds of $1.0 million (see News Release dated
December 30, 2020). On January 21, 2021, the Company completed a non flow -through private placement
financing whereby approximately 13.33 million non flow-through Units were issued for proceeds of $2.0 million
(see News Release dated January 21, 2021) . Each Unit was comprised of one common share and one warrant.
Each whole warrant entitles the holder thereof to purchase one common share at a price of $0.25, for a period
of twenty-four months from closing of the applicable private placement.
Activities relating to the Legal Proceedings
Star Diamond continues to vigorously pursue the Legal Proceedings, and is committed to taking all actions
necessary to protect Star Diamond and its shareholders from the practices and conduct of Rio Tinto Canada.
Pleadings in the Legal Proceedings have be en completed, with Star Diamond’s delivery of its Second Amended
Statement of Claim in December 2020, Rio Tinto Canada’s delivery of its Second Amended Statement of Defence
and Counterclaim in December 2020, and Star Diamond’s delivery of its Reply and Def ence to the Counterclaim
in January 2021.
Earlier this month, Rio Tinto Canada and Star Diamond each delivered their respective affidavits of documents to
the other. Star Diamond expects that the parties will agree to a timetable for the completion of the other principal
pre-trial steps, including oral questioning and the exchange of expert reports, which Star Diamond hopes will be
completed during 2021. Once the pre-trial steps are completed, Star Diamond expects that the Court will schedule
a pre-trial conference and set a date for trial. Star Diamond does not expect that the trial will occur in 2021.
As previously disclosed by Star Diamond, Rio Tinto Canada provided a n undertaking (the “Undertaking”) to the
Court, which was referred to in an August 10, 2020 decision of the Court in connection with the Legal Proceedings.
The Undertaking is binding on Rio Tinto Canada.
As the Undertaking is described by the Court in its August 10, 2020 decision, Rio Tinto Canada agreed that it would
not call and/or conduct any meeting of the management committee under the joint venture agreement (the
“Joint Venture Agreement”) between Star Diamond and Rio Tinto Canada for a period of 120 days following Rio
Tinto Canada completing the processing, diamond recovery and reporting o f all diamond results on the samples
previously taken from the ten bulk sample trenches excavated by Rio Tinto Canada in 2019.
Consistent with the Undertaking, Star Diamond has advised Rio Tinto Canada that, until all processing, diamond
recovery and repo rting of all diamond results from the ten cutter hole bulk sample program is completed,
including the comprehensive diamond breakage study, the 120 -day period under the Undertaking cannot begin
to run. Notwithstanding that the comprehensive diamond breakage study has not been completed, Rio Tinto
Canada advised Star Diamond on February 8, 2021 that the 120 -day period commenced on that date, and that
Rio Tinto Canada intends to call a management committee meeting under the Joint Venture Agreement once the
120-day period has elapsed. Rio Tinto Canada claims the completion of the comprehensive diamond breakage
study that it previously said would be undertaken is not required by the Undertaking it has given. Star Diamond
will vigorously resist any attempt by Rio Tinto Canada to call a management committee meeting other than in
compliance with the Undertaking (see News Release dated February 22, 2021).
Year to Date Results
For the year ended December 31, 2020, the Company recorded a net loss of $6.1 million or $0.01 per share (basic
and fully diluted) compared to a net loss of $4.1 million or $0.01 per share in 2019 . The losses during 2020 and
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2019 were primarily due to ongoing operating costs and exploration and evaluation expenditures incurred by the
Company exceeding interest and other income earned.
Selected financial highlights include:
Condensed Consolidated Statements of Financial Position
As at
December 31,
2020
As at
December 31,
2019
Current assets $ 5.0 M $ 8.0 M
Exploration and evaluation, capital and other assets 67.6 M 67.7 M
Current liabilities 1.0 M 0.3 M
Non-current liabilities 1.2 M 1.6 M
Shareholders’ equity 70.4 M 73.8 M
Consolidated Statements of Income (Loss)
Year Ended
December 31,
2020
Year Ended
December 31,
2019
Interest and other income $ 0.1 M $ 0.1 M
Expenses 6.1 M 4.2 M
Loss before undernoted items 6.0 M 4.1 M
Investment in Wescan Goldfields Inc. 0.1 M 0.0 M
Contingent consideration (0.2) M 0.0 M
Net loss for the period 6.1 M 4.1 M
Net loss per share for the period (basic and diluted) 0.01 0.01
Condensed Consolidated Statements of Cash Flows
Year Ended
December 31,
2020
Year Ended
December 31,
2019
Cash flows from operating activities $ (4.7) M $ (2.7) M
Cash flows from investing activities (0.0) M (0.0) M
Cash flows from financing activities 1.6 M 7.8 M
Net increase (decrease) in cash (3.1) M 5.1 M
Cash – beginning of period 7.9 M 2.8 M
Cash – end of period 4.8 M 7.9 M
Outlook
The provincial environmental approval of the Star - Orion South Diamond Project received in 2018, alongside the
previous positive federal decision, marked a major milestone for the Project. In addition, the positive results of
the 2018 independent PEA show that the Project can be economically developed and operated while providing
direct employment for hundreds of people throughout the c onstruction phase and hundreds of people
continuously over its estimated 38 year mine life.
The successful completion of the 2017 consolidation of the Company’s Fort à la Corne mineral properties
(including the Star - Orion South Diamond Project) and the concurrent earn-in arrangement with Rio Tinto
Canada defined the start of a new phase for the Company. There are some 60 other kimberlites within the
Company’s Fort à la Corne diamond district, on mineral dispositions held 100 percent by the Company. The
Company is also very pleased to continue to have Newmont Corporation as a significant shareholder.
As of March 30, 2021, the Company had approximately $5.3 million in cash and cash equivalents (excluding $0.6
million in restricted cash). A portion of the Company’s cash and cash equivalents will be used for programs
(including remaining flow-through commitments) to further assess, evaluate and advance certain aspects of the
Company’s mineral properties , as well as for general corporate matters.
Notwithstanding the work that has been and continues to be undertaken by Rio Tinto Canada in relation to the
Project, and prior statements made by Rio Tinto Canada and its affiliates in relation to the Project including as
referred to above, there can be no assurance that Rio Tinto Canada will seek to further invest in the Project or
seek to develop the Project into an operating mine, nor regarding what further studies, analyses, criteria or
conditions Rio Tinto Canada may consider relevant to its assessment of whether to do so.
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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 Company trade on the TSX under the trading symbol “ DIAM”.
The Fort à la Corne kimberlites (including the Star - Orion South Diamond Project) are located in central
Saskatchewan in close proximity to established infrastructure, including paved highways and the electrical power
grid, which provide significant advantages for future mine development.
During 2018, the Company announced the positive results of the independent Preliminary Economic Assessment
(“PEA”) on the Project. 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 commence ment of diamond
production (see News Release dated April 16, 2018).
During 2018, the Saskatchewan Ministry of Environment approved the Company’s Star - Orion South Diamond
Project (See News Release dated October 25, 2018). The Canadian Environmental Assessment Agency previously
announced a positive Environmental Assessment Decision for th e proposed Project by the federal Environment
Minister (See News Release dated December 3, 2014).
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", "targ et", "project",
"guidance", "may", "will", "should", "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an
outlook. In particular, statements regarding the Company's future operations, future exploration and development activities or other
development plans constitute forward-looking statements. By their nature, statements referring to mineral reserves, mineral resources or
the PEA constitute forward-looking statements. Forward-looking statements contained or implied in this news release include, but are not
limited to, statements related to the Legal Proceedings commenced by the Company against Rio Tinto Canada; statements regarding the
processing and analysis of, and reporting of results from, the bulk samples previously collected by Rio Tinto Canada and the timeline for
doing so; statements related t o diamond breakage and other actions to complete the processing, diamond recovery and reporting of all
diamond results on the samples previously taken from the ten bulk sample trenches excavated by Rio Tinto Canada in 2019; stat ements
related to Star Diamond’s intention to enforce the Undertaking; disclosure regarding the economics and project parameters presented in
the PEA, including, without limitation, Internal Rate of Return , Net Present Value and other costs and economic information, carats of
diamonds to be recovered, after-tax payback period, tonnes of kimberlite to be mined, carats per tonne to be recovered (grade), diamond
prices, project life, life of mine, capital costs, and length of pre-production period; statements related to mineral resources and/or reserves;
statements related to the approval of the development of the Star - Orion South Diamond Project; statements relating to future
development of the Star - Orion South Diamond Project and associated timelines; statements with respect to environmental permitting
and approvals; the Company's need for and intention to seek additional financing; statements with respect to metallurgical investigations,
assessments and test work including diamond breakage studies; and the potential proportion of Type IIa diamonds in the Star and Orion
South kimberlites and the potential for the recovery of large, high-quality diamonds.
These forward-looking statements are based on the Company'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 will not
be achieved due to a number of factors including, but not limited to, developments in world diamond markets, changes in diamo nd
valuations, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US do llar, changes in exploration,
development or mining plans due to exploration results and changing budget priorities of Rio Tinto Canada or the Company, the nature
and outcome of studies, analyses, criteria or conditions that Rio Tinto Canada may consider relevant to its assessment of whether to seek
to further invest in the Project or seek to develop the Project into an operating mine, the effects of competition in the markets in which
the Company operates, risks related to the Legal Proceedings including r egarding the counterclaim of Rio Tinto Canada against the
Company and any future legal proceedings to enforce the Undertaking, the impact of the COVID-19 pandemic, risks related to the operation
of the BSP and the processing methods being used by Rio Tinto Canada and the effectiveness thereof, risks related to diamond breakage
and cost overruns and other consequences arising from Rio Tinto Canada’s extraction and diamond recovery methodologies, risks related
to the Company’s need for additional financing an d the Company’s ability to raise that financing, the impact of changes in the laws and
regulations regulating mining exploration and development, judicial or regulatory judgments and legal proceedings, operational and
infrastructure risks and the additional risks described in the Company’s most recently filed Annual Information Form, annual and interim
MD&A, news releases and technical reports. The Company’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.
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Although the Company 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 Company, investors and
others should not place undue reliance on these statements and should carefully consider the foregoing factors and other unce rtainties
and potential events. Unless required by app licable securities law, the Company 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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