Stellar Diamonds to sell its Guinea assets for $2 million

Stellar Diamonds Plc announced that it has entered into a conditional binding Term Sheet with BDG Capital Limited ("BDG") in relation to the proposed sale of Stellar's assets in the Republic of Guinea.
 
Highlights:
•US$2,000,000 cash consideration price for Guinea assets
•US$250,000 cash has been received (part of the consideration price) as an exclusivity fee ("Exclusivity Fee")
•Exclusivity period of two months for due diligence and completion of documentation
•Joint Venture Agreement over Baoulé and Liberia with Citigate terminated
•Proceeds will be used to advance the development of the Company's flagship Tongo-Tonguma mine development in Sierra Leone
 
Chief Executive Officer of the Company, Karl Smithson, commented, "Subject to BDG satisfactorily completing its due diligence, this binding terms sheet should see Stellar realise some US$2 million in cash for its non-core projects in Guinea, representing approximately two thirds of our current market capitalisation. The proceeds will be used to advance the development of our flagship Tongo-Tonguma kimberlite project in Sierra Leone; a project that has an estimated post-tax NPV(8) of US$104 million attributable to Stellar. The proposed Tongo-Tonguma mine has a low capex requirement of US$32 million and the potential to be the second largest kimberlite diamond mine in West Africa - with forecast production levels of 200,000 carats per annum, generating revenues of over US$45 million per annum over a minimum life of mine of 21 years. The proposed disposal of our Guinea assets allows management to focus on the Tongo - Tonguma mine development in Sierra Leone.  It also allows for BDG to take the projects forward which is in the interests of Guinea and local stakeholders. We look forward to unlocking the significant value that we believe is inherent in the Tongo-Tonguma development as we advance the Company towards sustained commercial production."
 
The disposal comprises certain plant and equipment as well as the shares in subsidiary companies Ressources Tassiliman Baoulé (75% interest in the Baoulé project), Ressources Mandala Guinee (100% interest in the Mandala project) and West African Diamonds (100% interest in the Droujba project), collectively termed "the Guinea Projects".  Further detail on these assets is set out in the competent person's report which was announced on 31 October 2016 and which is available on the Company's website. Segmental information regarding the results and net book value of these assets is available in the Company's announcement of its interim results made on 31 March 2017.
 
Terms Sheet
The terms sheet with BDG Capital Limited, which is binding subject to BDG completing its due diligence satisfactorily, allows for a two month due diligence period during which time it is anticipated (although there can be no guarantee) the necessary share purchase agreements transferring Stellar's shares in its Guinea Projects to BDG will be completed. The final consideration price has been agreed at US$2,000,000 of which US$250,000 has been advanced to Stellar to ensure exclusivity for BDG to complete its due diligence.  Should Stellar withdraw from the proposed agreement and if the agreed terms are materially the same, then the exclusivity fee will be reimbursed to BDG in either cash or Stellar's shares at a price to be determined. However, BDG if proposes to materially amend the terms following due diligence and Stellar as a consequence withdraws then the exclusivity fee shall not be reimbursed. In the event that BDG decides not to continue with the transaction, the exclusivity fee of US$250,000 is not refundable to BDG.
 
Termination of Joint Venture Agreements with Citigate Commodities Trading (Citigate)
When the joint venture agreements (JVA's) were signed between Stellar and Citigate in November 2016 various warranties were made by Citigate to Stellar, including that Citigate had the necessary funding and authorisations to enter into the JVA's. This included a contractual payment to Stellar of US$150,000 as a management fee as a condition precedent to completion of the JVA's. To this date neither the project funding nor the management fee have been received from Citigate. Stellar has accepted such material breach as repudiatory and terminated the JVA's.

Stellar is an AIM listed West African focused diamond company with projects at the trial mining and mine development stages in Guinea and Sierra Leone.