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Star Diamond Corporation Announces Third Quarter Results

Press Release

Star Diamond Corporation (the “Company”) reports that the unaudited results of its operations for the quarter ended September 30, 2019 will be filed today on SEDAR and may be viewed at www.sedar.com once posted. A summary of key financial and operating results for the period is as follows:

Highlights

  • Announced updates on bulk sampling program by Rio Tinto Exploration Canada (”RTEC”) on the Company’s 100% held Star and Orion South Kimberlites (the “Star – Orion South Diamond Project”, or “Project”);
  • Announced completion of ten bulk sampling holes (trenches) by RTEC on the Company’s Star Kimberlite;
  • Working capital of $3.4 million at September 30, 2019;
  • Issued and outstanding shares of 409.1 million at September 30, 2019

Overview

Star Diamond Corporation is a Canadian natural resource company focused on exploring and developing Saskatchewan’s diamond resources. As a result of the 2017 mineral property consolidation and earn-in agreement with Rio Tinto Exploration Canada Inc. (“RTEC”), a wholly -owned subsidiary of Rio Tinto (see News Release dated June 23, 2017), the Company is now in an enhanced position to advance its 100% held Star – Orion South Diamond Project.

During 2018, the Company announced the positive results of an independent Preliminary Economic Assessment (“PEA”) on the Project. The PEA estimates that 66 million carats of diamonds could be recovered in a surface mine over a 38-year Project life, with a Net Present Value (“NPV”) (7%) of $2.0 billion after tax, an Internal Rate of Return (“IRR”) of 19% and an after-tax payback period of 3.4 years after the commencement of diamond production (see News Release dated April 16, 2018). In addition, during 2018, the Saskatchewan Ministry of Environment (“Ministry”) approved the Project (See News Release dated October 25, 2018). The Ministry conducted a thorough environmental assessment for the Project, including a detailed environmental impact statement, and carried out in-depth consultation prior to the decision to approve the Project. This included fulfilling the Province’s duty to consult with local First Nations and Métis communities. The Canadian Environmental Assessment Agency previously announced a positive Environmental Assessment Decision for the proposed Project by the federal Environment Minister (See News Release dated December 3, 2014).

Activities relating to the Star – Orion South Diamond Project

The Company recently announced that RTEC have completed the drilling of ten bulk sample holes (trenches) to conclude their program on the Company’s Star Kimberlite using the Trench Cutter Sampling Rig (See News Release dated October 8, 2019). The ten holes completed on the Star Kimberlite included a total of 2,351 metres of trench cutter drilling and intersected a total of 1,215.5 metres of kimberlite. Kimberlite was pumped to surface and recovered using a Kimberlite Separation Unit (“KSU”), with samples loaded and stored in cubic metre bulk bags, which total 6,848 in number (estimated by RTEC to be approximately 8,271 wet tonnes).

The Trench Cutter Sampling Rig being utilized by RTEC consists of a Bauer BC 50 Cutter mounted on a Bauer MC 128 Duty-cycle Crane. Cutter rigs by Bauer are used around the world for complex engineering projects. Bauer has indicated that this is the first time in the world that this technology is being used in an active project to sample kimberlite at depths of up to 250 meters. The Trench Cutter Sampling Rig is designed to sample large volumes of kimberlite by excavating a rectangular hole of 3.2 by 1.5 metres. The Trench Cutter Sampling Rig’s cutter head has been designed to excavate kimberlite fragments of up to 80 millimetres in diameter, which are then pumped in a slurry to the surface to a KSU. The KSU has been designed to recover kimberlite fragments between 80 and 0.85 millimetres from the Trench Cutter Sampling Rig slurry. The Trench Cutter Sampling Rig and associated KSU have been designed by RTEC to minimize diamond breakage during sample excavation, washing and bagging. This well washed kimberlite material will help ensure optimal performance of RTEC’s on-site Bulk Sample Plant (“BSP”), which is now at an advanced stage of construction. This on-site BSP uses a modern flow-sheet and the latest X-ray transmission (“XRT”) sorting technology to ensure any large diamonds present (up to 25 millimetres) are recovered with minimal breakage. Final diamond recovery from the concentrate produced by the on-site BSP is to be conducted by RTEC at a secure off-site facility.

Quarterly results

For the quarter ended September 30, 2019, the Company recorded a net loss of $ 0.8 million or $0.00 per share (basic and fully diluted) compared to a net loss of $1.0 million or $0.00 per share for the same period in 2018. The losses during the quarters ended September 30, 2019 and 2018 were due to operating costs and exploration and evaluation expenditures incurred by the Company.

Year to date results

For the nine months ended September 30, 2019, the Company recorded a net loss of $3.2 million or $0.01 per share compared to a net loss of $3.5 million or $0.01 per share for the same period in 2018. The losses during the nine month periods ended September 30, 2019 and 2018 were primarily due to ongoing operating costs and exploration and evaluation expenditures incurred by the Company exceeding interest and other income earned. Exploration and evaluation expenditures incurred during the nine months ended September 30, 2019 primarily related to geological and metallurgical investigations and test work for the Project as well as other costs associated with the Project.

Selected financial highlights include:

As at As at
Condensed Consolidated Statements of Financial Position September 30, December 31,
2018 2018
Current assets $ 3.5 M $ 2.9 M
Exploration and evaluation, capital and other assets 67.7 M 67.5 M
Current liabilities 0.1 M 0.3 M
Non-current liabilities 1.6 M 1.3 M
Shareholders’ equity 69.5 M 68.8 M
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Condensed Consolidated Statements of Loss September 30, September 30, September 30, September 30,
2019 2018 2019 2018
Interest and other income $  0.0 M $  0.0 M $ 0.0 M $ 0.1 M
Expenses 0.8 M 1.0 M 3.2 M 3.7 M
Flow-through premium recognized in income 0.0 M 0.1 M 0.0 M 0.2 M
Investment in Wescan Goldfields Inc. 0.0 M (0.1) M 0.0 M (0.1) M
Net loss for the period 0.8 M 1.0 M 3.2 M 3.5 M
Net loss per share for the period (basic and diluted) 0.00 0.00 0.01 0.01
Nine Months Nine Months
Ended Ended
Condensed Consolidated Statements of Cash Flows September 30, September 30,
2019 2018
Cash flows from operating activities $ (2.2) M $ (2.4) M
Cash flows from investing activities 0.0 M (0.1) M
Cash flows from financing activities 2.7 M 0.1 M
Net increase (decrease) in cash 0.5 M (2.4) M
Cash – beginning of period 2.8 M 4.0 M
Cash – end of period 3.3 M 1.6 M

Outlook

The provincial environmental approval of the Star – Orion South Diamond Project received in 2018, alongside the previous positive federal decision, marked a major milestone for the Project. In addition, the positive results of the 2018 PEA shows that the Project can be economically developed and operated while providing direct employment for hundreds of people throughout the construction phase and hundreds of people continuously over its estimated 38 year mine life.

The successful completion of the 2017 consolidation of the Company’s Fort à la Corne mineral properties (including the Star – Orion South Diamond Project) and the concurrent earn-in arrangement with RTEC defined the start of a new phase for the Company. It is the Company’s view that Rio Tinto is one of the few companies in the world with the resources and expertise to move forward with a project of the magnitude of the Star – Orion South Diamond Project and Fort à la Corne kimberlites. While RTEC’s work continues to focus on the bulk sampling of the Star and Orion South kimberlites, Brownfields exploration programs by RTEC also aim to investigate and prioritise the Company’s other kimberlite bodies in the Fort à la Corne diamond district. There are some 60 other kimberlites within the Fort à la Corne diamond district, on mineral dispositions held 100 percent by the Company. The Company is also very pleased to continue to have Newmont Goldcorp Corporation as a significant shareholder.

As of November 7, 2019, the Company had approximately $3.2 million in cash and cash equivalents (excluding $0.6 million in restricted cash). A portion of the Company’s cash and cash equivalents will be used for 2019 programs (including flow-through commitments) to further assess, evaluate and advance certain aspects of the Project, as well as for general corporate matters.

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