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.

Dyke-1 has a Joint Ore Reserves Committee-compliant resource of 1.45-million carats.

The PEA has 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. There was also opportunity to expand the mine life and project economics through the addition of any of the other three dykes in the licence area.

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.

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 than 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 allow for surface and underground mine infrastructure to be developed.

Duration
Not stated.

Latest Developments
Stellar Diamonds has been verbally informed that Sierra Leone’s Minerals Advisory Board has approved the company’s application for a mining licence for its Tongo project.

Progression of the licensing process, however, remains subject to the Ministry of Mines’ licensing body, the National Minerals Agency (NMA), formally writing to Stellar to inform it of the decision and drawing up a licence agreement, to be forwarded to the Minister of Mines for approval.

Thereafter, the fiscal terms of the mining licence will be negotiated between Stellar and the Sierra Leone government; the resulting mining concession agreement will require ratification through Parliament.

Stellar will inform shareholders when the formal letter from the NMA is received.

The company is engaging with the country’s Environmental Protection Agency about an environmental licence, which is also required before mining at Tongo can start.

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.