Stellar Diamonds completes Kono kimberlite acquisition from Petra Diamonds

Stellar Diamonds (AIM: STEL) told investors that it has now signed the share purchase agreement with Petra Diamonds Ltd (AIM: PDL) in respect of its acquisition of the remaining interest (51%) of the Kono kimberlite project in Sierra Leone.

Consequently, Stellar now has full ownership and control of Kono, which has been on care and maintenance since May 2009. Earlier this month, when it initially announced the deal, Stellar said it now believes the project is well positioned as diamond prices are recovering.

To acquire Petra’s 51% stake in Kono, Stellar has issued 4.5 million new ordinary shares, at a price of 20p per share, as consideration for the agreed purchase price of £900,000. Subsequently, Petra now holds shares representing 4.45% of Stellar’s issued capital, and it has agreed not to dispose of any of the consideration shares for 12 months. 

The Kono project is an underground trial mining operation targeting diamond bearing kimberlite dykes within two Exclusive Prospecting Licences covering an area of 206 square kilometers, located in the Kono diamond district of eastern Sierra Leone. Whilst under joint venture, the partners mapped approximately 17km of kimberlite dykes in the project area, and a number of shafts were sunk, with the underground development focusing on two kimberlite dykes, designated Pol-K and Bardu.

"This deal is excellent for Stellar shareholders as we gain full control of the Kono asset, which we consider has the potential to become a long-term mine for the company ... with the strong recovery in rough diamond prices, the Kono Project is an exceptionally well positioned development asset for Stellar to hold in its portfolio, offering growth to our future production pipeline”, Stellar chief executive Karl Smithson commented, on the 4th May.

"The Kono Project is among the most advanced in our portfolio with over US$17 million spent to date on the establishment of underground shaft and tunnel infrastructure, a 75 tonne per hour processing plant, earth moving machinery and on general exploration”, Smithson added.

This morning, in a note to investors, London-based stockbroker Astaire Securities said that Kono is an important, near production asset in Stellar’s portfolio. The broker highlighted that At Pol-K there are in-situ grades of 65cpht, whereas at Bardu the 66cpht in-situ grades rise to 140cpht as you move towards the west.

According to Astaire, these higher grades might be the start of a much higher grade zone, and could potentially make this a very valuable asset indeed.

Stellar completed a reverse takeover of West African Diamonds in February. In an update last month, the company said it has been harnessing operational and corporate synergies resulting from the merger, and also noted that it has benefited from a strong recovery in the rough diamond market.

Stellar is currently undertaking a programme to expand its producing mines and said it is very pleased with the accelerated progress being made as a newly quoted diamond producing company.

Post-takeover, the company has two producing Diamond operations in Guinea, Mandala and Bomboko. The Mandala mine began production mid-2009 and has produced more than 64,000 carats to date, realising sales in excess of US$1.7m. At Mandala, January and February’s production reached 16,400 carats at an average grade of 38.5 carats per hundred tonnes (cpht).