Name and Location
Tongo Dyke-1 kimberlite diamond project, Sierra Leone.

Client
Stellar Diamonds.

Project Description
A preliminary economic assessment (PEA) on the Tongo project has delivered robust economics that support the development of an openpit and subsequent underground mine.

The PEA focused on the base-case grade and resource model of 120 carats per hundred tonnes and 1.1-million carats to a depth of between 300 m and 400 m from surface over an initial 18-year life-of-mine.

A detailed mine plan has been established that will allow for surface bench stope mining from years one to four.

During the surface mining phase, the first underground shaft and infrastructure will be established so that underground ore production can start in Year 3 and, therefore, allow for a seamless transition from surface to underground operations.

Production from the first three years of surface mining is forecast to yield an estimated 117 800 ct, with revenues estimated at $28.5-million, while production from underground mining from years 4 to 18 is expected to yield 838 124 ct and revenues of $358.2-million.

The current life-of-mine plan is based solely on the Tongo Dyke-1 resource to a depth of between 300 m and 400 m.

Opportunities exist to extend the life-of-mine and enhance revenues and project economics by:
• deeper mining of Dyke-1 to levels similar to fissure mines in South Africa, which have operated at more than 700 m in depth;
• drilling and resource definition of Dykes 2, 3 and 4 on the Tongo licence, all of which have indicated grades similar to or higher than Dyke-1; and
• Dyke-1 possibly having a higher actual recovered diamond grade to that used in the PEA.

Net Present Value/Internal Rate of Return
The project has a net present value, at a 10% discount rate, of $53.2-million and an internal rate of return of 31%.

Value
The capital requirement to establish production in years one to four is estimated at $24.8-million, which will enable surface and underground mine infrastructure to be developed.

Duration
Not stated.

Latest Developments
Stellar has entered into a conditional convertible loan agreement with investment company Deutsche Balaton to raise $1.65-million through the issue of new convertible loan notes.

The proceeds of the convertible loan notes and a subscription for new ordinary shares will be used to provide ongoing working capital for the group, as it aims to complete the mining licence application for its Tongo project while resuming trial mining of the 5 ha diamondiferous Baoulé kimberlite pipe, in central Guinea.

The application for the Tongo mining licence will be formally submitted soon, with the approval process expected to be completed later this year or in early 2016.
 
The company will issue 7.59-million new ordinary shares at 6.55p apiece, while it has also entered into a conditional subscription agreement that will result in Deutsche Blaton subscribing for 6.9-million subscription shares.

Deutsche Blaton will hold 29% of the enlarged issued share capital of Stellar Diamonds.
 
The weighted average loan note conversion price, new warrant exercise price and subscription price is about 0.31p per existing Stellar share for a total investment of $4-million. The new warrants are exercisable following conversion or repayment of the convertible loan notes.
 
Key Contracts and Suppliers
Paradigm Project Management (PEA) and TerraNova-EcoSys (ESIA).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Stellar Diamonds, tel +44 20 7010 7686 or fax +44 20 7010 7699.