Rio Tinto and Star Diamond bury the hatchet
Diversified major Rio Tinto and Canadian junior Star
Diamonds on Thursday announced a comprehensive resolution of their disputes,
ending a protracted tussle over a joint venture (JV) project east of Prince
Albert, Saskatchewan.
The companies have agreed to revised JV arrangements that
they said best position the JV to advance the development of a diamond mining
operation on the Fort a la Corne property, which includes the Star-Orion South
diamond project.
The agreement ended a dispute over a 2017 agreement under
which Rio Tinto Exploration Canada (RTEC) had to spend $75-million to acquire
60% of what would be Saskatchewan’s first operational diamond mine. When RTEC
exercised all its options simultaneously, Star Diamonds objected, alleging the
multinational did so improperly.
Star Diamond claimed that RTEC overspent on the project
while exercising its earn-in options before completing and delivering results
from its bulk sampling programme. It claimed that RTEC was trying to boost its
stake at below market value.
The Saskatoon-based junior launched legal action against
RTEC in late 2019.
Under the new arrangements, Star Diamond and RTEC agreed
that all expenditures incurred at the Fort à la Corne property between November
9, 2019 and December 31, 2021 were the sole responsibility of RTEC. These expenditures were expected to amount to
$77.4-million (100% basis), which was in addition to the $103.6-million spent
by RTEC at the property prior to giving notice on November 9, 2019 that it was
exercising its options to JV.
Star Diamond will have no obligation to fund or contribute
to carried interest costs until the commencement of commercial production,
which will not occur until after the completion of construction of the diamond
mine with it generally operating at certain specified thresholds for 90
days. Once commercial production had
been achieved, Star Diamond will be required to reimburse RTEC for Star
Diamond's share.
The respective participating interests of RTEC and Star
Diamond in the JV have also been adjusted to 75% for RTEC and 25% for Star
Diamond, from 60% and 40%, respectively. Should Star Diamond enter into an
agreement to sell more than 50% of its shares to any other person, RTEC will
have five business days to match such an acquisition proposal.
“This is a major step forward for the Fort à la Corne
project, Star Diamond and its shareholders.
We are very pleased to have reached a constructive resolution with Rio
Tinto that puts our differences in the past, fully aligns our interests and
allows both of us to singularly focus on jointly and expeditiously moving
forward with what Star Diamond believes is one of the most promising diamond
projects in the world," stated Star Diamonds chairperson Ewan Mason.
Star Diamonds' stock closed 13% higher on Thursday at C$0.20
a share.
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