Following the agreement between Stellar Diamonds plc and Octea Mining to combine their adjacent Tongo and Tonguma diamondiferous kimberlite dyke properties in eastern Sierra Leone, the proposed project was subject to an independent Preliminary Economic Assessment (PEA).

Announcing the results of the proposed combined mining project, Stellar said that the PEA “demonstrates a financially robust and high margin 21 year life of mine over an initial resource of 4.5 million carats”. Further, the  PEA also notes that there is a possibility of  additional high-grade kimberlite dykes on the properties which are not yet categorised into resource.

Summarising the PEA, Stellar announced that the pre-tax Project NPV and IRR were estimated at US$ $172 million and 49% respectively. The revenue expected over the life of the Project was put at around US$ 1,518 million; while operating costs have been estimated at US$ 847 million; with an estimated operating margin of 50% over the life of mine.

Stellar expects the first production to flow out within 12 months, ramping up to over 200,000 carats p.a. in the fourth year. The Company estimates that 3.96 million carats are recoverable from the initial 4.5 million carats resource at a +1.18mm cut-off.

The diamond grades and values recoverable from the first three kimberlites expected to be mined have been put as:

•          Kundu: 260cpht and $209 per carat ($543 per tonne)

•          Lando: 220cpht and $209 per carat ($440 per tonne)

•          Tongo: 100cpht and $310 per carat ($310 per tonne)

Chief Executive Karl Smithson commented: “The PEA of the combined Tongo-Tonguma mine demonstrates robust financial returns for a modest capital requirement and supports the Board’s decision to pursue this strategic acquisition. Three kimberlite dykes, Kundu, Lando and Tongo are contained within the mine plan and have compellingly high diamond grades and values and together support a long life of mine. We are further encouraged by the potential which exists to significantly increase the resource base by bringing a number of additional high grade kimberlites that have been discovered to date on both licences into the long term resource base.”