ADVANCING DIAMOND RESOURCES IN SIERRA LEONE AND GUINEA TOWARDS FEASIBILITY AND PRODUCTION Marketing Presentation: January 2013 AIM:STEL
ADVANCING DIAMOND RESOURCES
IN SIERRA LEONE AND GUINEA TOWARDS FEASIBILITY AND PRODUCTION
Marketing Presentation: January 2013
AIM:STEL
DISCLAIMER
The content of information contained in these slides and the accompanying verbal presentation (together, the “Presentation”) has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 (“FSMA”). Reliance upon this Presentation for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. If any person is in any doubt as to the contents of this Presentation, they should seek independent advice from a person who is authorised for the purposes of FSMA and who specialises in advising in investments of this kind. This Presentation is being supplied to you solely for your information. This Presentation has been prepared by, and is the sole responsibility of, the directors of Stellar Diamonds plc (the “Company”). Those directors have taken all reasonable care to ensure that the facts stated herein are true to the best of their knowledge, information and belief.
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DISCLAIMER (contd.)
The Company’s ordinary shares have not been, and are not expected to be, registered under the United States Securities Act 1933, as amended, (the “US Securities Act”) or under the securities laws of any other jurisdiction, and are not being offered or sold, directly or indirectly, within or into the US, Canada, Japan, Australia, the Republic of South Africa or the Republic of Ireland or to, or for the account or benefit of, any US persons or any national, citizen or resident of the US, Canada, Japan, Australia, the Republic of South Africa or the Republic of Ireland, unless such offer or sale would qualify for an exemption from registration under the US Securities Act and/or any other applicable securities laws.
This Presentation or documents referred to in it contain forward-looking statements. These statements relate to the future prospects developments and business strategies of the Company and its subsidiaries (the “Group”). Forward-looking statements are identified by the use of such terms as “believe”, “could”, “envisage”, “estimate”, “potential”, “intend”, “may”, “plan”, “will” or the negative of those, variations or comparable expressions, including references to assumptions. The forward-looking statements contained in this Presentation are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. If one or more of these risks or uncertainties materialises, or if underlying assumptions prove incorrect, the Group’s actual results may vary materially from those expected, estimated or projected. Given these risks and uncertainties, potential investors should not place any reliance on forward-looking statements. These forward-looking statements speak only as at the date of this Presentation.
No undertaking, representation, warranty or other assurance, expressed or implied, is made or given by or on behalf of the Company, Daniel Stewart & Company Plc (“Daniel Stewart”) or any of their respective directors, officers, partners, employees or advisers or any other person as to the accuracy or the completeness of the information or opinions contained herein and to the extent permitted by law no responsibility or liability is accepted by any of them for any such information or opinions. Notwithstanding the aforesaid, nothing in this paragraph shall exclude liability for any representation or warranty made fraudulently.
Daniel Stewart, which is regulated in the United Kingdom by the Financial Services Authority, act only for the Company in relation to the Placing and are not acting for or advising any other person or treating any other person as its customer in relation thereto and will not be responsible for providing the protections afforded their respective customers or for advising any other person in relation to the matters contained herein or on any matters concerning the Placing. No representation or warranty, express or implied, is made by Daniel Stewart at to the contents of this Presentation and, without limiting the statutory rights of any person to whom this Presentation is issued, no liability whatsoever is accepted by Daniel Stewart for the accuracy of any information or opinions contained in this Presentation or for the omission of any material information for which the directors of the Company are solely responsible.
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OVERVIEW OF STELLAR DIAMONDS
Strategic diamond assets in Sierra Leone and Guinea
JORC compliant resource of c. 4 million carats compiled in 2012
Implied contained value of $381 million (Oct-12 prices)
Market cap £8.1m
Significant growth potential and a robust diamond market outlook
Placing to raise up to £1m to fund economic studies prior to pre-feasibility studies
Tongo gems ($248/ct average run of mine)
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FAST TRACK PROGRESS TOWARDS PRODUCTION
2007-2010 2011 2012 2013 2014
Assets acquired,
exploration starts
Bulk sampling &
drilling
4m carat diamond
resource confirmed
Pre-feasibility
studies
Production decision
$10m invested to date to define an inferred 4m carat JORC resource with an contained value of $381m
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TODAY
FOCUSSED IN THE HEART OF THE WEST AFRICAN DIAMOND FIELDS
PAGE 5 Kono licences in dispute
OPERATIONS ACTIVITIES DURING 2012
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Droujba: panoramic view
Tongo: 5tph bulk sample plant
* Kono licences subject to dispute
Tongo: core drilling (Boart Longyear)
Kono: Lion-5 kimberlite Shuttering - Safety 1st
Droujba: Katcha Dyke bulk sampling
Tongo: Rig mobility – rapid interhole moves (Boart Longyear)
Kono: Inside Lion-5 kimberlite
Droujba: Bulk sampling
Droujba: 5tph bulk sampling plant
Droujba Pit & Bulk sample sites
DIAMOND RESOURCE: 4 MILLION CARAT JORC COMPLIANT
Project Resource tonnes
Grade +1mm (cpht)
Inferred JORC carats in resource
Modelled average
diamond value ($/ct)
Implied contained
value US$m
In-situ value $/t
TONGO 895,000 120 1,074,000 248 266 298
DROUJBA 3,960,000 63 2,474,000 38 94 24
KATCHA 319,000 140 446,000 48 21 67
TOTAL 5,174,000 3,994,000 381
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Further resource potential: Tongo - Dyke-1 increasing resource from 300m to 600m depth could double existing resource - Dyke 2 (140cpht est.) and Dyke 4 (109cpht and $100/ct) not yet in resource
Further resource potential: Droujba - Surface grade of 88cpht (diluted) being confirmed at depth could increase existing resource by 40% - Katcha resource is currently only over a 470m strike length to 150m depth - Katcha is 5,000m long and to 300m depth could increase the current Katcha resource by 20 times
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RISING ROUGH DIAMOND DEMAND DRIVEN BY EMERGING MARKETS
• During the next 10 years, growing GDP and urbanisation in emerging markets plus shifting consumer tastes will drive rough diamond demand
• Global demand for rough diamonds is forecast to grow annually by a rate of 5.9%
• Diamond supply, from existing or new mines, is predicted to grow annually by only 2.5% until around 2018 when global production will level off and probably decline
• Global Jewellery demand, with a trend towards higher gem diamond content, is forecasted to grow by 35% over the next 5 years
• By 2016, India & China will account for ~30% of incremental global demand. By 2020 this is predicted to rise to 50% overtaking the USA as the largest diamond jewellery market
• This supply-demand imbalance will drive diamond price inflation
Source: De Beers
2013: NEXT STEPS
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PROJECT Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
TONGO
(Underground mining)
Conceptual economic scoping study
Conceptual economic scoping study
Commence PFS PFS infill drilling and bulk sampling
PFS report
Underground trial mining decision as ramp up to commercial production
DROUJBA
(Open pit mining)
Conceptual economic scoping study
Conceptual economic scoping study
Commence PFS PFS large diameter drilling and bulk sampling
PFS report
Production decision for open pit operation, 1.5 million carats over 5 years
Note: PFS is estimated to cost $2m+ per project
CONCEPTUAL ECONOMIC SCOPING STUDY
• Define preliminary economics and business case up front
• Focus on mine design, planning and treatment plant design and processing options
• Provide capex, opex and financial analysis
• Allows for prioritisation of projects
• Lower funding requirement
• Less risky use of funds
• Provide Board with an independent validation of project economics
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Trial mine shaft at Kono
- Paradigm Project Management appointed to conduct CESS - PPM executive team has significant experience in all aspects of
diamond mine development - Clients include De Beers, Alrosa, Gem Diamonds, Lucara Diamonds,
Rockwell Diamonds, Paragon Diamonds, Trans Hex Diamonds,
DYKE-1: FAST TRACK TO UNDERGROUND TRIAL MINING
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Conceptual Economic Scoping Study
• Q1-13 conceptual economic scoping study
• Define economic model to 35% confidence limits
• Scenario of producing 80,000 carats per year, generating potential revenues of $20m/yr for 10 years
• Q3-13 commence pre-feasibility study to 15% confidence limits
• Underground trial mining of Dyke 1 as part of ramp up to commercial scale production
Tongo Dyke-1 diamonds: average modelled value $248/ct
Dyke 1 Resource Model: 1.9km strike to 300m depth
W E
CB
Kcm
CBK
DROUJBA PIPE: OPEN PIT MINE POTENTIAL
• Droujba has both open cast and underground mine potential
• CESS aimed at evaluating economics of open pit mine
• Study will concentrate on mine design and planning and process plant design and treatment operations
• Scenario of producing 300,000 carats per year, generating revenues of $15m/yr over 5 years
• Followed by pre-feasibility study to 15% accuracy to include underground resource
• Production decision on open pit operation in Q1 2014
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Conceptual Economic Scoping Study
360m
Open cast potential
Underground potential
CBK Kcm CB
Extreme case (US$200/ct)
Base case x1.6 (US$80/ct)
Base case (US$50/ct)
Droujba open pit showing bulk sample pits
Schematic cross-section of Droujba pipe
PROJECT DELIVERY
Stellar has built a focussed and dedicated team
• 3-man executive team
• Core team of experienced project managers
• 8 skilled geologists trained by Stellar over many years
• Significant local employer
Extensive project and diamond experience in West Africa since 2000
Track record of delivering results on time and within budget
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Stellar team at Droujba
BOARD & MANAGEMENT
KARL SMITHSON, CHIEF EXECUTIVE OFFICER
Geologist and MBA with 24 years’ African diamond exploration and development experience, including 12 years in West Africa. Senior management positions with De Beers, SouthernEra and African Aura Mining.
ROWAN CARR, CHIEF OPERATING OFFICER
Geologist: MSc. with 26 years’ experience in the diamond mining industry under De Beers and Stellar where he managed operations in Botswana, South Africa, Angola, CAR , DRC, Sierra Leone, Liberia and Guinea.
PHILIP KNOWLES, FINANCIAL CONTROLLER
Qualified accountant and MBA with BA in accounting and finance. Over 10 years diversified experience, including four years as Group Financial Controller for both Kopane Diamonds and Firestone Diamonds.
LORD DARESBURY (PETER), NON-EXECUTIVE CHAIRMAN
Involvement in emerging markets since 1994. Previously Non-Executive Chairman of De Vere Group plc 2000-2006, Chairman of KazakhGold Group Ltd 2005-2007 and Executive Chairman of Highland Gold Mining Ltd 2002-2004.
Dr. MARKUS ELSASSER, NON-EXEC DIRECTOR
An experienced financer and investor in the natural resources sector. Director of Arctic Gold and Impact Minerals. Currently head of the Elsässer Family Office.
LUIS DA SILVA, NON-EXEC DIRECTOR
CEO Afferro Mining and Non-Executive Director of Aureus Mining. Mining Engineer and MBA with operational, technical and corporate experience globally with Blue Circle Industries and Lafarge SA.
STEVEN POULTON, NON-EXEC DIRECTOR
Mining geologist previously with Mano River for 7 years. Co-founder of Ariana, African Aura and Altus Strategies, CEO of Altus Strategies.
JAMES CAMPBELL, NON-EXEC DIRECTOR
Mining geologist and MBA with 24 years’ experience in the diamond mining industry under De Beers, where he held a number of senior positions. Previously Managing Director of African Diamonds Plc. CEO and President of Rockwell Diamonds.
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USE OF PROCEEDS
Project Use Amount (£)
Droujba Pipe, Guinea Conceptual Economic Scoping Study 300,000
Togo Dyke, Sierra Leone Conceptual Economic Scoping Study
300,000
Working Capital Corporate and in country overheads and contingency 350,000
Placement fees Corporate finance, legal, commissions 50,000
Total 1,000,000
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CORPORATE INFORMATION STRONG NEWSFLOW IN 2012 NOT REFLECTED IN SHARE PRICE
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Stock data 11th January 2013
Ticker AIM:STEL
Share price £0.0275
Shares in issue 294,512,400
Market capitalisation £8.1m
Significant shareholders
Nassim Funds (institutional) 14.0%
Aureus Mining 10.5%
BlackRock 5.6%
Barclays Nominees 4.6%
Directors and management 4.2%
UBS Deutschland (private) 3.6%
Hottinger 3.5%
Capital structure Number of shares
Shares outstanding 294,512,400
Share options 24,453,575
Fully diluted 318,965,975
0
1
2
3
4
5
6
7
8
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13
Share Price - GBp
Droujba Resouce of 3m carats
Tongo Resource over 1m carats
Board Dr Elsasser appointed
Droujba 161cpht from Katcha bulk sampling
Droujba 100cpht grade from bulk sampling + large diamonds
Droujba Encouraging grades from bulk sampling
Funding £2m raised from issue of shares
Kono Licence dispute
Droujba 2.5m carat maiden resource
Tongo 660k carat maiden resource
Kono Encouraging diamond grades
Tongo Encouraging diamond grades
INVESTMENT CASE
4mcts in resource valued at $381m delivered in 2012
Low cost economic scoping studies planned to define business case for pre-feasibility studies
Key objective of near term production and revenue
Track record of delivering key milestone targets on time and within budget
Strong diamond sector fundamentals driven by emerging market demand
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Tongo gems ($248/ct average run of mine)
CONTACT DETAILS
STELLAR DIAMONDS PLC. 355 The Strand London WC2R 0HS
KARL SMITHSON Chief Executive Officer Tel: +44 (0) 7783 707 971 Email: [email protected]
PHILIP KNOWLES Financial Controller Tel: +44 (0) 755 744 4007 Email: [email protected]
APPENDIX: KONO KIMBERLITE PROJECT AND LICENCE DISPUTE
Stellar is in dispute with the Ministry of Mines over two permits covering 87km² adjacent to the Koidu Holdings (Octea) mine
Company strongly disputes the claims by the Ministry pertaining to the licences being invalid as all required work programmes and expenditure have been met
Political avenues being pursued to resolve the situation
Tongo licence renewed in Sept-12 for three years
Kono Licences Progress
• US$19m invested to date in Kono since 2004
• Numerous high-grade kimberlites tested
• 4,200 carats produced from underground trial mining
• High in-situ grades:
– Pol-K: 65cpht
– Lion-5: 90cpht
• High diamond quality:
– Pol-K: US$175/ct (est.)
– Lion-5: US$230/ct
• Subject to satisfactory resolution of the licence dispute Stellar will re-institute evaluation and resource definition programme
Sierra Leone
Stellar’s Kono Plant site
Pol-K: 10.51ct gem sold for US$2,700/ct in 2008
Lion-5: 4.45ct gem valued at US$3,000/ct
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