Stellar Diamonds plc, a diamond development company focused on West Africa, announced development in regards to a proposed transaction with Octea Mining Limited. The transaction is to combine Stellar’s Tongo kimberlite diamond project with Octea’s adjacent kimberlite diamond project, Tonguma, and to bring both assets into production under the same production infrastructure in Sierra Leone.

If this transaction is completed, it would be classified as a Reverse Takeover under the AIM Rules for companies and would require the publication of an admission document and also be subject to shareholder approval.

As such, trading in the company’s shares on AIM will remain suspended until either an admission document is published or the company announces its or Octea’s withdrawal from the Potential Transaction.

According to Stellar, this transaction will bring a combined inferred diamond resource of 5 million carats, diamond grades up to 290 carats per hundred tonne, average diamond value of US$193 and US$270 per carat for Tonguma and Tongo, respectively. It will also create exploration target of up to 8 million carats and an opportunity of enhanced production levels and operational margins, when compared with a stand-alone Tongo mining operation.

No cash acquisition costs would occur to Stellar who will fund and operate the enlarged mine development and will preferentially recoup repayment of development capital prior to paying a royalty and net profit interest to Octea.

Stellar’s Chief Executive Karl Smithson said, “The Proposed Transaction, if completed, will be transformational for Stellar and its shareholders. 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. 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. 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.”

Octea’s General Manager Christo Swanepoel added that, “We are very excited to be combining Octea’s Tonguma project with Stellar’s Tongo project and bring the enlarged project into production under Stellar’s operational management. 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.”