Stellar Diamonds signs binding term sheet to divest Guinea assets


West Africa-based Stellar Diamonds has signed a conditional binding term sheet to sell its assets in the Republic of Guinea to BDG Capital Limited. 

Under the terms, the cash consideration price for Guinea assets is $2m. As an exclusivity fee, Stellar Diamonds has received $250,000 as part of the consideration price. 

An exclusivity period has been allocated for two months for due diligence as well as completion of documentation. 

Stellar Diamonds chief executive Karl Smithson said: "Subject to BDG satisfactorily completing its due diligence, this binding terms sheet should see Stellar realise some $2m in cash for its non-core projects in Guinea, representing approximately two-thirds of our current market capitalisation. 

"The proceeds will be used to advance the development of our flagship Tongo-Tonguma kimberlite project in Sierra Leone; a project that has an estimated post-tax NPV(8) of $104m attributable to Stellar."

The proposed Tongo-Tonguma mine has a low capex requirement of $32m. Further, it has the potential to be a leading kimberlite diamond mine in West Africa with annual production forecast to be of 200,000 carats, and an annual revenue-generating capacity of over $45m during its minimum life of 21 years.

Smithson continued: "The proposed disposal of our Guinea assets allows management to focus on the Tongo-Tonguma mine development in Sierra Leone. It also allows for BDG to take the projects forward which is in the interests of Guinea and local stakeholders.

"The proposed disposal of our Guinea assets allows management to focus on the Tongo-Tonguma mine development in Sierra Leone."

"We look forward to unlocking the significant value that we believe is inherent in the Tongo-Tonguma development as we advance the company towards sustained commercial production."

The divestment consists of certain facilities and equipment, as well as shares in subsidiary companies - Ressources Tassiliman Baoulé (75% interest in the Baoulé project), Ressources Mandala Guinee (100% interest in the Mandala project) and West African Diamonds (100% interest in the Droujba project), which together are known as 'the Guinea Projects'. 

Meanwhile, the joint venture agreement over Baoulé and Liberia with Citigate stands terminated.

Joint venture agreements (JVAs) were signed between Stellar and Citigate in November 2016.

Citigate had made several guarantees, including that it had the necessary funding and authorisations to enter into the JVAs.

This deal also included a contractual payment of $150,000 as management fee to Stellar as a condition required for completion of the JVAs. 

Stellar Diamonds stated that as neither the project funding nor management fee had been received from Citigate, it decided to terminate the JVA.