Stellar Diamonds has signed an agreement to combine its Tongo kimberlite diamond project with Octea Mining's similar site in Tonguma.

The Tongo project has a JORC inferred resource of 1.45 million carats at a grade of 165cpht.

The Tonguma project consists of a 25-year mining licence covering an area of 124km² in the Lower Bambara Chiefdom, Kenema District, in the Eastern Province of Sierra Leone.

Both assets are planned to be brought into production under the same infrastructure.

"The enlarged project should significantly increase local skilled employment for many years to come."

Stellar Diamonds chief executive Karl Smithson said: “Once in production the combined diamond mining operations will be the second largest in West Africa with an estimated maximum output at full production of approximately 250,000 carats per year of high value diamonds.

“Using the available infrastructure at Tongo and Tonguma, we expect diamond mining operations to commence within the first 12 months post completion of the proposed transaction.”

As part of the deal, the combined inferred JORC diamond resource of five million carats will be brought into a single mining operation.

Octea Mining general manager Christo Swanepoel said: “Stellar has long-standing expertise in Sierra Leone and the Tongo region in particular, which we believe will be of great benefit to the project.

“In addition, the enlarged project should significantly increase local skilled employment for many years to come, which in turn will support the local economy as well as generate significant funds for the Sierra Leonean Government.”

Under the agreement, Stellar will transfer shares of its subsidiary Sierra Diamonds into a new company, which will then acquire Octea Mining’s subsidiary Tonguma. 

Stellar has also signed an agreement to recoup its initial investment of at least $25m, while Octea will pro rata recoup a maximum of $5m during the same period.