Stellar Diamonds PLC (LON:STEL) has revealed details of a deal that would see it form a much larger mining operation than it previously envisaged in Sierra Leone.
The AIM quoted group will, via a reverse takeover, merge with Octea Mining which effectively combines Stellar’s Tongo undeveloped mine with Octea’s nearby Tonguma project.
Together the consolidated project will be host to some 5mln carats which could be extracted through a single mining operation, while the new company’s portfolio would also include some 8mln carats of exploration targets.
Mining could come around a year after the two companies are combined, according to Karl Smithson, Stellar chief executive.
"The proposed transaction, if completed, will be transformational for Stellar and its shareholders,” Smithson said.
“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.”
Christo Swanepoel, Octea general manager, added: "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.
“Stellar has long-standing expertise in Sierra Leone and the Tongo region in particular, which we believe will be of great benefit to the project.”
Stellar had trading in its AIM quoted shares suspended on August 19 pending news of the proposed deal, and the suspension is due to continue.