Star DIAM Mentioned (Mon, 10 Aug) - Summary by Will Purcell Ken MacNeill and Ewan Mason's Star Diamond Corp. (DIAM) lost one-half cent to 17.5 cents on 369,000 shares. Recent comments made by Mr. Mason, the company's chairman, to a local news organization, Prince Albert-based paNOW, conveyed tones of optimism juxtaposed with the company's usual grumpiness. So far, it appears the object of the company's displeasure, Rio Tinto Exploration Canada Inc. (RTEC), is not swayed by the media presence put forward by Star, its partner in exploration and litigation at the Fort a la Corne (FalCon) project just east of Prince Albert in central Saskatchewan.
When asked by paNOW reporter Glen Hicks to offer "a message of hope for Star Diamond shareholders," Mr. Mason replied that "we don't need hope," adding that "we have a great asset; we actually have a great partner when their eyes are on the ball." Unfortunately, from Star Diamond's perspective at least, RTEC's focus has been on its own ball, resulting in what Star's management has called bad-faith "predatory and coercive tactics designed to misuse [RTEC's] economic clout to misappropriate from Star Diamond and its shareholders some portion of the very significant value that exists in the Star-Orion South diamond project."
Mr. Mason took a lead role a month ago in offering scathing criticism of RTEC. He said that company was engaged in "unfair and improper conduct," referring to what he described as "Rio Tinto's bait and switch approach," whereby the "allure of a mutually beneficial partnership is replaced with the reality of dealing with an organization that has little regard for the agreements it signs, business ethics, local stakeholder interests or anything other than its own monetary self-interest."
(While the offer of a mutually beneficial partnership may have been Star's goal, the option to joint venture agreement signed by the two companies in the spring of 2017 clearly indicated that RTEC could deliver either the bait -- 30 holes of trench-cutter sampling and a feasibility study -- or the switch -- the alternative of spending at least $70.5-million in lieu of the sampling and the study. Indeed, RTEC later used the switch to exercise all four options in rapid-fire fashion in the fall of 2019 and claim a 60-per-cent interest in the project. The wording of that switch was apparently clear enough that a Saskatchewan Court of Queen's Bench justice, in denying a Star Diamond injunction last year, cautioned that Star would likely be facing an "uphill battle" in arguing that RTEC had not exercised its four options.)
Despite Star Diamond's withering criticism of RTEC and its parent, Rio Tinto PLC, Mr. Mason easily segues from his Mr. Hyde surliness to that of a kindlier Dr. Jekyll, telling paNow that he is confident that a resolution to the legal dispute can be had. "I'm pretty sure we are going to resolve this," he cheered, noting that Star Diamond's board was not sitting idly by, and talks were continuing with RTEC.
Indeed, there are plenty of opportunities to talk, as RTEC has continued to produce data at FalCon, although at a much slower pace than over the last two years in which RTEC spent well over $100-million. Further, RTEC called a management committee meeting in mid-July of a joint venture that Star Diamond says does not yet exist, so it would be a shock if geologists are not talking to geologists, managers to managers -- and most certainly, lawyers to lawyers.
For its part, RTEC remains all but silent in public. It does say that the FalCon project remains on standby while it evaluates options for further work. In fact, the company appears resigned to the court case dragging out well into 2022. Over the next year, RTEC says, its proposed work is expected to focus on technical studies to investigate options for optimal mining methods and maintaining the site -- hardly words of optimism for those looking for a quick resolution to the dispute, or for a quick decision to advance FalCon to construction and onward to production.