Star Diamond (DIAM-T) share price stuck like glue near the 20-cent mark for most of the past seven years, has found a new, slightly higher perch, thanks to investors anticipating the start of a big bulk sampling program by the company's co-venturer, Rio Tinto PLC. Rio Tinto can earn a 60-per-cent interest in the Fort a la Corne project in central Saskatchewan by completing about $70-million of work, including three 10-hole tests of the main kimberlites.
Work on the first test began last fall, but it was quickly called off because of challenges. While the partners easily completed cutter soil mixing panels atop five of the selected sites at the big Star kimberlite, they had to terminate the first hole at a depth of 37 metres. While the trench cutter rig worked well, the dig was held back by the slow pace of the desanding plant. Rio Tinto's crews have apparently spent the winter sorting things out and work should resume later this year.
Mr. MacNeill, president and chief executive officer, and Mr. Read, senior vice-president, say that a 90-person camp has been set up at the site and will be expanded soon. As well, Rio Tinto has nearly completed work on a bulk sample storage facility, and the processing plant has been built in South Africa and shipped, with all but three of the 25 sea shipping containers now at the site. Mr. MacNeill and Mr. Read now say that preparations for the construction of the bulk sampling plant are under way, but they do not say when the constructing or bulk sampling will begin.
Meanwhile, Star Diamond's latest presentation shows that Rio Tinto will dig 20 big holes at Orion South and just 10 at Star, which has the better grades and diamond values. That is not a surprise: Star Diamond has been touting a new plan to begin mining at Orion South rather than at Star, because the economic kimberlite is closer to the surface in the former pipe. As well, Rio Tinto, which is essentially doing a $70-million recheck of Star's data before it commits to building a huge mine, probably wants to ensure that Orion South has the needed rock value.
Star Diamond rolled out a preliminary economic assessment of the project last spring, based on the revised plan to mine starting at Orion South. The dream sheet showed a $1.02-million discounted net present value after taxes for a $1.4-billion mine. Orion South would be mined for the first 18 years, with Star the main source of diamonds for the next 16 years. The bulk of the diamonds at Orion South and most of those at Star will come from the Early Joli Fou (EJF) phase of kimberlite, which is apparently what Rio Tinto intends to retest.
About two-thirds of the 272 million tonnes of kimberlite in Orion South is EJF material and it averages 16 carats per hundred tonnes, with the grades and proportion nearly a match with the 250 million tonnes of kimberlite at Star. The diamonds have different modelled values, with Orion South's EJF diamonds modelled at $173 (U.S.) per carat and the Star EJF gems at $207 (U.S.) per carat. Proving up the value of the EJF kimberlite at Orion South will be critical, as nearly all the remaining rock at Orion South is Pense kimberlite, which grades just five carats per hundred tonnes and hosts diamonds modelled at only $144 (U.S.) per carat. Therefore, the fate of Orion South rests with the EJF material. |
