Star Diamond Corporation Announces Third Quarter 2021 Results

Canada NewsWire

SASKATOON, SK, Nov. 10, 2021

TSX: DIAM

SASKATOON, SK, Nov. 10, 2021 /CNW/ - Star Diamond Corporation ("Star Diamond" or the "Company") reports that the unaudited results of its operations for the three and nine months ended September 30, 2021 will be filed today on SEDAR and may be viewed at www.sedar.com once posted. All currency amounts are in Canadian dollars. A summary of key financial and operating results for the three months ended September 30, 2021 is as follows:

Highlights

   -- Continued pursuit of the legal proceedings commenced by Star Diamond 
      against Rio Tinto Exploration Canada Inc. ("Rio Tinto") arising out of 
      the purported exercise in November 2019 by Rio Tinto of its four options 
      under the Option to Joint Venture Agreement dated June 22, 2017 (the 
      "Option Agreement") 
   -- Working capital of $1.1 million at September 30, 2021 
   -- Issued and outstanding shares of 452.8 million at September 30, 2021 

Overview

Star Diamond is a Canadian natural resource company focused on exploring and developing Saskatchewan's diamond resources. In June 2017, the Company announced that it had acquired from Newmont Corporation all of its participating interest in the Fort à la Corne joint venture, resulting in the Company owning 100% of the Fort à la Corne mineral properties, including the Star - Orion South Diamond Project (the "Project"). The Company concurrently announced that it had entered into the Option Agreement with Rio Tinto pursuant to which the Company granted Rio Tinto an option to earn up to a 60% interest in the Company's Fort à la Corne mineral properties (including the Project) on the terms and conditions contained in the Option Agreement (see News Release dated June 23, 2017).

In November 2019, Star Diamond received notice from Rio Tinto advising that Rio Tinto was purporting to exercise all four of its options under the Option Agreement (see News Release dated November 15, 2019). In February 2020, the Company notified Rio Tinto that its purported exercise of its four options under the Option Agreement did not comply with the terms of the Option Agreement (see News Release dated February 18, 2020). In March 2020, the Company announced that it had commenced legal proceedings in the Court of Queen's Bench for Saskatchewan (Judicial Centre of Saskatoon) (the "Court") against Rio Tinto (the "Legal Proceedings") in relation to Rio Tinto's purported exercise of its options under the Option Agreement (see News Release dated March 5, 2020).

Activities relating to the Star - Orion South Diamond Project and Fort à la Corne mineral properties

During 2019, the Company announced that Rio Tinto completed the drilling of ten bulk sample holes (trenches) on the Company's Star Kimberlite. These ten trench cutter holes included a total of 2,351 metres of trench cutter drilling and intersected a total of 1,215.5 metres of kimberlite.

During the second quarter of 2020, the Company announced that Rio Tinto had commenced the processing of these bulk samples (see News Release dated April 23, 2020). The initial results from these ten trench cutter holes have now been reported by Star Diamond.

During February 2021, Rio Tinto provided written notice to Star Diamond that Rio Tinto had successfully completed its ten-trench cutter hole bulk sample program (see News Release dated February 22, 2021). Rio Tinto also confirmed to Star Diamond that this bulk sample program had met Rio Tinto's objective of improving confidence in the diamond grade of the Project. In response, Star Diamond notified Rio Tinto that completion of a comprehensive diamond breakage study and certain other work remained outstanding.

The initial results from the ten reported trenches continue to validate the grades outlined in the Company's independent Preliminary Economic Assessment ("PEA") that was based upon Star Diamond's own prior underground bulk sampling and large diameter drilling programs. The recovery of larger diamonds from Rio Tinto's bulk sample program, including larger Type IIa diamonds, also continues to strengthen the expectation for recovery of large, high value diamonds in a future producing diamond mine.

During the first quarter of 2021, the Company announced that Rio Tinto commenced an eight-hole geotechnical drilling program on and in proximity to the Orion North Kimberlite (see News Release dated January 19, 2021). The drill rigs utilized were capable of sonic drilling to obtain representative samples of the glacial overburden and core drilling for the underlying kimberlite or host rock sediments. Star Diamond has been advised that the aim of this drilling is to investigate the geotechnical properties of the overburden, kimberlite and host rock sediments, with this information to be used for future open pit design. Parts of the Orion North Kimberlite have shallower overburden than the Star and Orion South Kimberlites.

Activities relating to the Legal Proceedings

Star Diamond continues to vigorously pursue the Legal Proceedings, and is committed to taking all actions necessary to protect the interests of Star Diamond and its shareholders.

Pleadings in the Legal Proceedings have been completed. During March 2021, Rio Tinto and Star Diamond each delivered their respective affidavits of documents to the other. The other principal pre-trial steps that remain to be completed include oral questioning and the exchange of expert reports. Once the pre-trial steps are completed, Star Diamond expects that the Court will schedule a pre-trial conference and set a date for trial.

On July 26, 2021, Rio Tinto purported to hold a meeting of the management committee of the joint venture that Rio Tinto claims was previously formed between Star Diamond and Rio Tinto. At that meeting, representatives of Rio Tinto purported to unilaterally approve a proposed joint venture budget for the period from June 2021 to March 2022 of $17.8 million, and to add to that budget an aggregate of $64.4 million allegedly spent by Rio Tinto during 2019, 2020 and the first five months of 2021.

As previously disclosed by Star Diamond, it believes that no joint venture has been formed because Rio Tinto's November 2019 purported exercise of its options under the Option Agreement did not comply with that agreement. Accordingly, Star Diamond believes that the July 26, 2021 purported meeting of the management committee was not valid. Further, Star Diamond believes that, even if a joint venture had been validly formed, which as stated Star Diamond does not believe is the case, the relevant agreements do not allow Rio Tinto to include in the joint venture budget, or otherwise recover from Star Diamond, much of the $64.4 million allegedly spent by Rio Tinto during 2019, 2020 and the first five months of 2021.

Star Diamond expects that these issues will form part of the Legal Proceedings. To the extent that Star Diamond does not fund its portion of joint venture expenditures in circumstances where it is required to do so, Star Diamond's interest in such joint venture may be diluted.

Quarterly results

For the quarter ended September 30, 2021, the Company recorded a net loss of $2.0 million or $0.00 per share (basic and fully diluted) compared to a net loss of $1.7 million or $0.00 per share for the same period in 2020. The losses during these quarters were due to operating costs and exploration and evaluation expenditures incurred by the Company exceeding interest and other income earned on cash and cash equivalents.

Year to Date Results

For the nine months ended September 30, 2021, the Company recorded a net loss of $5.2 million or $0.01 per share (basic and fully diluted) compared to a net loss of $4.2 million or $0.01 per share for the same period in 2020. The losses during these nine month periods were primarily due to ongoing operating costs and exploration and evaluation expenditures incurred by the Company exceeding interest and other income earned.

Selected financial highlights include:

Condensed Consolidated       As atSeptember 30,2021    As atDecember 31,2020 
Statements of Financial 
Position 
Current assets                  $               2.6 M     $              5.0 M 
Exploration and evaluation, 
 capital and other assets                      67.6 M                   67.6 M 
Current liabilities                             1.5 M                    1.0 M 
Non-current liabilities                         1.1 M                    1.2 M 
Shareholders' equity                           67.6 M                   70.4 M 
Condensed Consolidated Statements of Loss    Three Months           Three Months           Nine MonthsEnded    Nine Months 
                                              EndedSeptember 30,     EndedSeptember 30,     September 30,       Ended S 
                                              2021                   2020                   2021                September 30, 
                                                                                                                2020 
Interest and other income                       $            0.0 M     $            0.0 M   $           0.0 M   $         0.0 M 
Expenses                                                     1.9 M                  1.8 M               5.2 M             4.4 M 
Investment in Wescan Goldfields Inc.                       (0.1) M                  0.1 M               0.0 M             0.2 M 
Net loss for the period                                      2.0 M                  1.7 M               5.2 M             4.2 M 
Net loss per share for the period (basic 
 and diluted)                                                 0.00                   0.00                0.01              0.01 
Condensed              Quarter EndedSeptember      Quarter EndedSeptember 
Consolidated           30,2021                     30,2020 
Statements of Cash 
Flows 
Cash flows from 
 operating activities     $               (4.3) M     $                (3.7) M 
Cash flows from