Stellar Diamonds starts trial mining in Guinea

For a junior diamond-development company with operations in Guinea and Sierra Leone — two of the three countries in West Africa hit by the Ebola virus — it’s remarkable that Stellar Diamonds (US-OTC: SDIZF; LSE: STEL) is able to put out any good news at all.

But the company announced on Oct. 9 that it had recovered the first diamonds from trial mining at its Baoulé kimberlite pipe in the Aredor district of southeastern Guinea, an area that has historically yielded large, high-value diamonds from alluvial mining.

So far all the samples Stellar has processed from the project’s 100-tonne-per-hour dense media separation processing plant, have yielded diamonds. Of the 54 carats recovered, one is a gem diamond of 1.37 carats and another is a lower-quality 3.76-carat stone.

The next step is to optimize the plant commissioning before the company increases the volume throughput of kimberlite ore, which the company says could take a few more weeks.

The objective of the program is to collect and process a minimum of 100,000 tonnes of kimberlite, and Stellar says the large-scale bulk sampling — or trial-mining effort — will establish the diamond grade and value of the kimberlite pipe, while providing the company with cash flow over the next year.

Stellar explained in a press release in May that “given the tough market conditions for small mineral-resource companies, the directors believe that the acceleration of Baoulé to trial mining is the correct strategy to deliver shareholder value, as Baoulé has the potential to generate cash flow for the company during the second half of 2014.”

Stellar now expects its first cash flow from diamond sales in the fourth quarter of 2014.

The company has been stripping the eastern lobe of the 5-hectare Baoulé pipe since early September and is now at the point, it says, where it has exposed highly decomposed kimberlite pipe underlying a laterite cap and mixture of saprolitic kimberlite and laterite that was dug by artisanal miners.

The Baoulé kimberlite pipe was discovered in 1999. Using the historical database as a guide, Stellar modelled a target resource of more than 22 million tonnes to a 300-metre depth. Bulk sampling by previous owners yielded grades of between 13 and 40 carats per hundred tonnes (cpht). Taking the lower grade of 13 cpht, Stellar is targeting a diamond resource of 3 million carats. In 2000, a 500-carat parcel produced by the pan plant that did not have any large stones was sold for US$157 per carat, and Stellar believes that if the same parcel was sold today it could expect to fetch more than US$200 per carat. 

In December 2013, Stellar entered into a joint-venture agreement with local group Société Tassiliman, with an option to earn a 75% interest in the Baoulé kimberlite. It has since earned its 75% by spending US$5 million on the project, and has the option to acquire the remaining 25% with the agreement of its local partner. At the time it entered the joint-venture agreement, CEO Karl Smithson said the Baoulé pipe “has many of the hallmarks of a potentially large-tonnage project that can be rapidly advanced.”

According to Stellar, the Baoulé kimberlite pipe may be one of the sources of the high-value Baoulé alluvial diamonds in the Aredor region. The company says commercial alluvial mining operations in the vicinity have recovered numerous high-quality diamonds of over 200 carats. Within the last 25 years, it says, a 255-carat stone was sold for US$10 million in 1989 and a 285-carat stone was sold for US$8 million in 1993.

Elsewhere in Guinea, Stellar holds the 3-million-carat Droujba project. In Sierra Leone, the company is advancing its 1.1-million carat Tongo Dyke-1 resource through a definitive feasibility study. The company is also trying to reinstate its Kono licences in Sierra Leone through diplomatic and legal channels.

In August, Stellar reported that the final bulk-sample grade at its Tongo kimberlite project exceeded 178 cpht. (It recovered 1,182 carats from kimberlite ore at an average grade of 178.7 cpht.) Highlights of the program were the 53 diamonds larger than 1 carat, including stones of 6.7 and 4.6 carats.