JOHANNESBURG (miningweekly.com) – Aim-listed Stellar Diamonds has entered into a potential deal that will see its Tongo kimberlite diamond project, in Sierra Leone, merged with Octea Mining’s adjacent Tonguma kimberlite diamond project to form a single 250 000 ct/y mining operation.

The move, which will effectively establish West Africa’s second-largest diamond mining operation, will significantly enhance production and operational margins as the assets are brought into production using the same infrastructure.

“The high-grade and high-value nature of the kimberlites to be mined are compelling and the combination of operations should provide meaningful cost synergies that will enhance Stellar's projected operational margins,” said Stellar CEO Karl Smithson.

The mining of two separate resources as one, and centrally processing ore, is expected to net the company a number of cost savings, more efficient operations and significantly increased production rates.

Combined, the operation will produce high-value diamonds at grades of between 120 and 290 carats per hundred tonnes mined, with the Tongo/Tonguma deposits boasting a combined resource of five-million carats and some eight-million carats of identified exploration upside.

Stellar will not have to fork out acquisition costs, but, rather, will fund and operate the enlarged project by raising a minimum of $25-million and recouping this initial development capital through a preferential repayment structure with Octea prior to any royalty payments and net profit share due its new partner.

The diamond development company intends bringing the combined Tongo/Tonguma project into production within 12 months of the completion of the proposed transaction, which remains subject to conditions, including final and binding transaction agreements.

“It is envisaged that processing will be undertaken centrally, using the existing 50 t/h production plant, which will be relocated to the project area from Octea’s Koidu mine, approximately 60 km north of Tonguma,” Stellar said.

The initial capital outlay for Tongo as a standalone project was previously projected at $25-million; however, independent consultants Paradigm Project Management estimate the initial capital requirements at $40-million to establish production for the combined project.

Paradigm and SRK Consulting are preparing the combined Tongo/Tonguma mine plan, which will provide more detail on production rates, revenues and capital and operational costs.

Further, the combined assets unlocked the potential for both surface and underground mining across both licences.