Building the Tongo-Tonguma Diamond Mine in Sierra Leone

Transcription

1 Building the Tongo-Tonguma Diamond Mine in Sierra Leone September 2017 Diamonds from Tongo, Sierra Leone 1

2 Disclaimer The information contained in these slides and communicated verbally to you, including the speech(es) of the presenter(s) and any materials distributed at or in connection therewith (together, the "Presentation") is confidential. Reliance upon the Presentation for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. If any person is in any doubt as to the contents of the Presentation, they should seek independent advice from a person who is authorised for the purposes of the Financial Services and Markets Act 2000 ("FSMA") and who specialises in advising on investments of this kind. Any investment decision should not be made based on the content of the Presentation but be made solely on the basis of any relevant final admission document. The Presentation is being supplied to you solely for your information. The Presentation has been prepared by, and is the sole responsibility of the directors of Stellar Diamonds plc (the Company ). The directors of the Company have taken all reasonable care to ensure that the facts stated herein are true to the best of their knowledge, information and belief. No undertaking, representation, warranty or other assurance, expressed or implied, is made or given by or on behalf of the Company, Mirabaud Securities LLP ("Mirabaud"), or any of their respective subsidiary undertakings, directors, officers, partners, employees or advisers or any other person as to the fairness, accuracy or the completeness of the information or opinions contained herein and to the extent permitted by law no responsibility or liability is accepted by any of them for any such information or opinions. Notwithstanding the aforesaid, nothing in this paragraph shall limit or exclude liability for any representation or warranty made fraudulently. 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3 Overview of Tongo-Tonguma project Potential to be 2 nd largest kimberlite diamond mine in West Africa Low ($30 million) capex to establish commercial production Targeting first production within 12 months of commencement Some of the highest value kimberlites in Africa on a $/t basis Targeting 200,000 carats production per annum by end of Year 3 Tongo-Tonguma Mine: Robust Economics US$45M gross revenue (pa) at full production US$74/t all in opex US$147t revenue US$229/ct weight av. US$ 1.2B life of mine revenues / minimum 21 year mine life US$109M Stellar attributable post-tax NPV(8) 30% IRR 3

4 Tongo-Tonguma: Tribute Mining Agreement Exclusive agreement with Octea Mining (April 2017) Deal Process Creates an enlarged long life operation (>21 years) Stellar remains owner of Tongo and will contract mine Tonguma No up-front acquisition costs Mine plan independently generated PEA by SRK/PPM 50tph Koidu production plant vended to Stellar Significant camp and infrastructure already in place Stellar investment repaid from first revenues and US$5 million to Octea Post Stellar repayment, 10% revenue share to Octea US$5.5 million bullet payment to Octea after Year-5 Exclusive HoT Tonguma Resource Statement Combined Mine Plan Combined Financial Model CPR Legal & full agreements etc. Project Funding

5 Tongo-Tonguma: Overview Adjacent exploration and mining licences covering entire Tongo kimberlite diamond field Easily accessible (7hrs drive) from capital Freetown US$ 45 million of exploration underpins resource confidence Combined inferred JORC resource of 4.5 mct: mct classified as recoverable mine resource - in-situ recoverable grades of cpht - diamond values of US$ /ct (at +1.18mm cut-off) Low capex of US$30 million Life of mine revenues estimated at gross US$1.2 billion Further 8mct targeted through further geological work, offers significant future upside All production figures based on independent PEA by PPM and SRK 5

6 Tongo-Tonguma: Licences & Resources Combined licence areas cover the whole of the renowned Tongo diamond field 6

7 Tongo-Tonguma: Exceptional Quality Diamonds High colour range High clarity Good crystal shapes giving high yield on polishing Gem quality 6.70 carat stone Photos of Tongo (Dyke-1) diamonds 7

8 Tongo-Tonguma: Grade & Value Peer Comparison Tongo-Tonguma has the highest $/t kimberlite values of newly developed mines Diamond Value (US$/ct) Grade (cpht) In-Situ Value ($/t) 8

9 Tongo-Tonguma: JORC Resource with Significant Upside Potential Based on 66,000m of drilling and extensive bulk sampling Mine plan (to metres) gives 21 year mine life base on current 4 mcts recoverable resource (+1.18mm cut off) Potential for further 8 mcts exploration target to be converted into JORC resource Kimberlite Inferred Tonnes (million) Depth (m) Grade (cpt) Carats (mcts) recoverable at +1.18mm cut off Diamond Value US$/ct Geol. Potential Tonnes (million) m* Grade (cpt)* Geol. Potential Carats (mcts) in-situ at +1.18mm cut off* Kundu Lando Tongo Dyke TBC Pendebu Panguma Tongo 1.4 TBC Seleima 0.4 TBC Total * Figures are mid-range based on resource statement 9

10 Tongo-Tonguma: Two year timeline Targeting initial diamond production within 12 months of FEED commencing Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Licence funding and close transaction Capex debt funding FEED and mine development drilling EPCM/mob./set up Kundu Decline Lando Decline Tongo Decline Relocate and upgrade plant Commissioning Production Time line in accordance with PEA 10

11 Tongo-Tonguma: Production Profile A 21 year life of mine from three declines on Tongo Dyke-1, Kundu and Lando Targeting production in Year-1 with potential to ramp up 200,000 cts by end of Year-3 US$45 million gross revenue per annum at full production Potential to extend the LoM beyond the initial 21 years: - by extending the project to greater depth - by bringing in additional kimberlites into the resource and mine plan 400, , , , , , ,000 50, From PEA by PPM/SRK Ore Mined and Treated Total waste mined Carats Recovered 11

12 Tongo-Tonguma: Mine Economics 4 mcts recoverable resource Capex to commercial production: US$30 million Opex:US$74/t Directors Model Project Post-tax* Directors Model Stellar Interest Post Tax* Revenue: US$147/t Revenue per carat: US$229 (weighted av.) Operating margin: 49.6% NPV US$156M (NPV8) US$109M (NPV8) IRR 33% 30% Life of Mine Revenues: US$1.2 billion Mine plan, capex and opex assumptions based on PEA by PPM/SRK modified for post-tax* *Assumes: Capex contingency of 10% Diamond price inflation 3% (real) 6.5% Govt Royalty, full tax relief of previously capitalised expenditure, Tax rate of 30% These assumptions are in line with those used by Mirabaud in their research model 12

13 IRR Tongo-Tonguma: Sensitivity Analysis NPV (8) IRR $200,000,000 50% $180,000,000 45% $160,000,000 40% $140,000,000 35% $120,000,000 30% $100,000,000 25% $80,000,000 20% $60,000,000 15% $40,000,000 10% $20,000,000 5% $- -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 0% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Capex Opex Revenue Capex Opex Revenue 13

14 Tongo-Tonguma: Existing Plant & Infrastructure Using existing 50 tph plant from Octea Plant to be relocated and upgraded Significant camp and office facilities in place EMV s, haulage trucks, 4x4 vehicles etc. Bulk fuel storage tanks Reduces initial construction time and costs Vehicle fleet Camp & offices 50TPH production plant EMVs, diggers, graders etc. 14

15 Summary Compelling mine asset combination with estimated production levels of 200,000 cts per annum Potential to be 2nd largest kimberlite diamond mine in West Africa Targeting production within 12 months, 21 year life of mine US$45 million per annum gross revenues at full production US$1.2 billion revenues over life of mine Sierra Leone 50 th Anniversary Tongo Drilling Blasting Dyke-1 Tongo diamonds 15

16 Karl Smithson Chief Executive Officer Tel: +44 (0) Philip Knowles Chief Financial Officer Tel: +44 (0) Rory Scott / Richard Morgan Mirabaud Securities Tel: +44 (0) richard.morgan@mirabaud.co.uk Tim Blythe / Nick Elwes Blytheweigh Tel: +44 (0) nick.elwes@blytheweigh.com Stellar Diamonds Plc 40 Bloomsbury Way, London, WC1A 2SE 16

17 Appendix: Corporate Details Exchange Shares on issue Market capitalisation Stellar s investment in Tongo Octea s investment in Tonguma 1 Value Proposition post tax Capital Structure AIM: STEL 54.9 million 1.8 million ($2.3m) 5.5 million 28 million NPV(8) $109 million & 30% IRR 1 Year Share Price 1 Reported and not verified by Stellar Board & Management Lord Daresbury Non-exec Chairman Karl Smithson Chief Executive Hansjörg Plaggemars Non-executive Steven Poulton Non-executive Philip Knowles Chief Financial Officer Rowan Carr COO Shareholder Analysis 15.60% 6.60% 4.60% 11.50% Deutsche Balaton AG Foradex Invest SRL UBS Deutschland Directors & Management 61.70% Other 17

18 Appendix: Rough Diamond Market Outlook Rough supply will see significant decreases from 2020 which will positively impact rough prices Rough prices forecast to stabilise at an average of US$130/ct from 2020 onwards (Tongo/Tonguma average of US$ /ct) Growing GDP and urbanisation in emerging markets plus shifting consumer tastes are forecast to drive additional rough diamond demand 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Global rough production Global rough production ($ m) Global rough production (ct m) Diamond exploration spend has seen significant decline since the peak in 2007/2008 as large players such as De Beers have pulled back and juniors have found funding difficult Lack of discoveries will further negatively impact future production levels and lead to upward pressure on rough prices in the long term Production value and average rough price Production value ($ Bn) Rough price ($/ct) Source: RBC 18

19 Appendix: Local and National Benefits Stellar s preliminary mine plan estimates the following GoSL financial benefits over the life of the initial 21 year life of mine: - Royalties to Government: Estimated to be around $80 million - Corporate Tax: Estimated to be around $144 million Mining Licence fees, Environmental Licence fees, Community Development and Surface Rental fees add further significant returns to stakeholders Local employment opportunities are significant. The Mine will generate over 1,000 jobs at its peak, with widespread skills training and transfer Strong drive to develop local skills to replace reliance on expatriates for key management Local SME businesses will greatly benefit from increased activity through providing services to the mine as well as the trickle down of wages into the local economy and communities Both Stellar and Octea are fully committed to continue an extensive community development programme which we intend to implement in conjunction with local stakeholders We strongly believe the mine has the potential to significantly transform the local area in terms of infrastructure, small business development, living conditions and wider employment and educational opportunities 19