Stellar to enter into tribute mining agreement with Octea

JOHANNESBURG (miningweekly.com) – Stellar Diamonds has terminated discussions with Octea Mining around the acquisition of the Tonguma kimberlite diamond project, in eastern Sierra Leone.

Instead, Stellar and Octea intend to enter into a tribute mining agreement, which will allow Stellar to fund and mine the Tonguma licence area, alongside its own Tongo project, and process and sell any diamonds mined from these concessions, in return for paying Octea 10% of the gross sales revenue.

However, this will only take place after Stellar has recouped an amount equal to its development capital and Octea has received an initial revenue share payment of $5-million.

Stellar will make a one-off payment to Octea of $5-million five years after mine development starts, while certain assets of Tonguma, including the 50 t/h processing plant at Octea’s Koidu mine, will be acquired by Stellar for a nominal amount. Stellar intends to relocate and upgrade the plant which will then become the processing facility for the combined Tongo-Tonguma mining operation.

The final tribute agreement is expected to include a timeframe within which implementation of the mine plan will be expected; however, this timeframe has yet to be negotiated.

Stellar CEO Karl Smithson noted that the company believed the economics of the proposed tribute agreement were “very attractive”, adding that, over the life-of-mine, the estimated post-tax net present value could be around $104-million.

There also remains considerable potential upside beyond the 4.5-million-carat resource through bringing additional high-grade kimberlites on both properties into resource and the future mine plan.

“We hope to be able to bring the formal agreement and due diligence process to a conclusion soon,” said Smithson.