JOHANNESBURG (miningweekly.com) – West Africa-focused diamond development company Stellar Diamonds has announced the results of an independent preliminary economic assessment (PEA) for the combined Tongo-Tonguma project.

Stellar Diamonds and junior diamond developer Octea Mining last month agreed to combine their adjacent Tongo and Tonguma diamondiferous kimberlite dyke properties in eastern Sierra Leone and bring both assets into production under the same production infrastructure.

The potential transaction, if completed, will be classified as a reverse takeover under the Aim rules for companies and will require the publication of an admission document and also be subject to shareholder approval.

Nonetheless, on Wednesday, Stellar released the results of the PEA, which it said demonstrated a “financially robust” and high-margin 21-year life-of-mine over an initial resource of 4.5-million carats.

The company added that the PEA also recognised that “considerable upsides” existed from additional high-grade kimberlite dykes on the properties which were not yet categorised into the resource.

“The PEA of the combined Tongo-Tonguma mine demonstrates robust financial returns for a modest capital requirement and supports the board’s decision to pursue this strategic acquisition,” stated Stellar CE Karl Smithson.

He noted that three kimberlite dykes, Kundu, Lando and Tongo, were contained within the mine plan and possessed “compellingly high diamond grades and values” and together supported a long life of mine.

Smithson said the companies were further encouraged by the potential that existed to significantly increase the resource base by bringing a number of additional high-grade kimberlites that have been discovered to date on both licences into the long-term resource base.

“We continue to make good progress with the legal and other due diligence processes that are required to complete the transaction and will provide further updates in due course.”

He commented that the competent persons report on the project would be announced in “due course” and marketing to new investors and existing shareholders would then commence.

Smithson explained that, by virtue of the transaction being classified as a reverse takeover under the Aim rules for companies, trading in Stellar’s shares on Aim remained suspended until either an admission document was published or the company announced its or Octea's withdrawal from the transaction.

He pointed out that, if the transaction was completed, this would result in Stellar having a 75% economic interest in the project following, inter alia, preferential repayment of the initial investment made by Stellar and payment of certain revenue royalty payments as outlined in the transaction announcement.