Stellar Diamonds to ink deal that would create Sierra Leone’s second largest mine

Shares in West Africa-focused Stellar Diamonds (LON:STEL) were slightly up on Monday after the company unveiled a deal that would see it build Sierra Leone’s second largest diamond mine.

The proposed deal involves combining Stellar’s Tongo kimberlite project in Sierra Leone (with average diamond value of $270 per carat) with Octea Mining Limited’s adjacent Tonguma kimberlite project (average diamond value of $193 per carat).

The proposed deal involves combining Stellar’s Tongo mine with Octea Mining’s adjacent Tonguma operation.

The consolidated project will produce about 250,000 carats per year of high value diamonds (120-290cpht), the company said in the statement. The new operation will have a total resource of 5 million carats (with 8 million carat identified exploration upside).

Stellar, which applied for large-scale mining in Sierra Leone late last year, said the proposed transaction, if completed, would be “transformational” for its shareholders.

“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,” Stellar chief executive Karl Smithson said in a statement.

“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,” Smithson noted.

If approved, the deal will create a new company, and as such will be considered a reverse takeover.

Stellar’s shares were up 1.33% to 7.22p in London mid-afternoon, but they are down 24% so far this year.

Stellar Diamonds inks deal to build Sierra Leone’s second largest mine

Sampling at the Tongo project. (Image courtesy of Stellar Diamonds)