The AIM listed diamond development company, Stellar Diamonds has agreed a proposed transaction with Octea Mining to create Sierra Leone’s second-biggest diamond mine with an estimated maximum output (at full production) of approximately 250 000 carats per year of high value diamonds.
The plan is to combine Stellar’s Tongo kimberlite diamond project with Octea’s Tonguma kimberlite diamond project, and bring both assets into production under the same production infrastructure, in the West African country.
“Using the available infrastructure at Tongo and Tonguma, we expect diamond mining operations to commence within the first 12 months post completion of the proposed transaction,” said Karl Smithson, Chief Executive, Stellar Diamonds.
The deal has been labelled as a “reverse takeover” because of the creation of a new company – Stellar Diamonds will transfer the shares of its subsidiary Sierra Diamonds to the newly incorporated company which will then acquire the shares of Octea Mining’s subsidiary Tonguma.
Stellar would be issued with 100% of the voting ‘A’ shares in the new company which will entitle them to full legal and management control of the new company and the mining operation, while Octea would be issued with 100% of the non-voting ‘B’ shares in the new company will entitle them to receive financial benefits; between 5% to 10% of the combined revenues of Tonguma and Tongo, and 25% economic interest in their combined net cash flows.
Chris Swanepoel, General Manager, Octea added, “In addition, the enlarged project should significantly increase local skilled employment for many years to come which in turn will support the local economy as well as generate significant funds for the Sierra Leonean Government.”