British Australian mining giant Rio Tinto has indicated that it intends to exercise its options under a 2017 option-and-joint-venture agreement with Saskatoon-based explorer Star Diamonds, which owns the Fort a la Corne kimberlites in central Saskatchewan.
TSX-listed Star Diamonds announced on Friday that Rio Tinto Exploration Canada (RTEC) would exercise all four options – years earlier than the major had to – giving it a 60% interest in the Star-Orion South project.
The first option entailed RTEC conducting a ten-hole bulk sampling programme on the project, including processing and diamond recovery, or incurring C$18.5-million of direct and indirect expenses relating to mineral prospecting, exploration, development, mining, and associated expenses. Completing the first option did not earn RTEC any interest in the project.
The second option provides that RTEC must complete the first option, after which it can earn a 51% stake in the project by conducting a ten-hole bulk sampling programme, or incurring expenditure of C$18.5-million.
Completing the third option will add another 4% to RTEC’s project ownership, provided it conducts another ten-hole bulk sampling programme on the project, or incurs further expenditure of C18.5-million.
Provided RTEC completes the third option, RTEC has the option to acquire a further 5% interest in the project by completing a feasibility study, or spending C$15-million more.
RTEC has been given three years to complete the first option, and in total, the time from the effective date to the end of the fourth option cannot exceed 7.5 years.
The Star-Orion South project is in central Saskatchewan, about 60 km east of the city of Prince Albert.
Star Diamonds stock jumped 50% on the news on Friday, trading just below a one-year high at C$0.29 a share.