Stellar narrows loss as Tongo-Tonguma project construction continues

VANCOUVER (miningweekly.com) – Aim-listed Stellar Diamonds has narrowed its full-year loss while continuing to make progress on developing its Tongo diamond project, in Sierra Leone.

For the financial year ended June 30, the company reported a pretax loss of $2.3-million, compared with $7.1-million a year earlier.

The miner did not recognise revenue during the year, nil compared with $499 725 in revenue reported from the sale of diamonds the year before.

"The capital markets for junior resource companies remain challenging, and although the company's current financial position is weak we have obtained strong shareholder support in recent open offer financings," Stellar CEO Karl Smithson said.

"Stellar continues to carefully manage its day to day working capital and alongside our loan note holders, who remain fully supportive, we are working on, and remain optimistic of securing, the required project funding to develop the Tongo-Tonguma project," Smithson explained in a press release.

"The mine has the potential to be the second largest kimberlite diamond mine in West Africa and transform Stellar from a small cap explorer in to a mid-tier diamond mining company."

Smithson added that during the past year the proposed acquisition of the Tonguma diamond project has been restructured to a tribute mining and revenue share agreement.

"The terms of the transaction require Stellar to fund the capital development of the combined Tongo-Tonguma mining operation in return for a de-facto 90% revenue share of future project revenues, once Stellar has fully recouped its capital outlay. Stellar and Octea continue to work together to extend the longstop dates to the completion of the tribute mining and revenue share agreements as required, to allow Stellar the necessary time to complete the required project development funding," Smithson said.

Stellar announced last week that it had extended the longstop to the end of January. The new longstop would cover project costs which are estimated to be around $80 000/m.

The combined Tongo-Tonguma project demonstrates a 21-year life of mine exploiting the initial 4.5-million carats. Forecast production targets of over 200 000 ct/y would generate significant estimated annual cash flows of $45-million.

The project has an after-tax net present value attributable to Stellar of $109-million. “This is far in excess of the company's current market capitalisation and therefore rightly deserves our exclusive strategic focus."

Meanwhile, the company reported that Sierra Leone has demonstrated twice this year why it should be the target of diamond miners. "Gem quality diamonds of 709 c and 478 ct have been discovered by third parties and the country has a rich history of yielding world class stones, such at the 970 ct 'Star of Sierra Leone',” Smithson advised.

Shares in Stellar rallied up to 22% higher on Tuesday to 2.75 pence.