Star DIAM Mentioned (Mon, 09 May) - Review by Will Purcell Ken MacNeill and Ewan Mason's ever-enthusiastic but long-stalled Saskatchewan diamond explorer, Star Diamond Corp. (DIAM), lost one-half cent to 30 cents on 185,000 shares. The company continues to review what Mr. Mason, chairman, called an "enormous amount of data" covering the FalCon diamond project in central Saskatchewan, information supplied to it at an early March technical meeting held with its joint venture partner, Rio Tinto Exploration Canada Inc. (RTEC).
At the time, Mr. Mason and his company said they were reviewing the data and promised to share what they could concerning their analysis as it progressed. So far, Star Diamond has expounded on one of the eight key topics of interest addressed at that technical meeting and work presumably continues with the assessment the other seven. Meanwhile, the clock ticks relentlessly toward a presumptive date for the next joint venture management committee meeting, where the two companies are to set a 2022 budget that will kick in at the end of May.
While Mr. Mason cheers that he and Star's technical adviser, George Read, were "impressed with the detail and depth of the technical evaluation" that the RTEC crew had compiled and delivered over the past two years, there is no firm indication that RTEC, which controls the decisions of the joint venture through its 75-per-cent ownership of FalCon, is champing at the bit to get back to anything like the $100-million annual budget that it proposed late in 2019.
Curiously, Rio Tinto's website no longer lists FalCon as one of its active projects, a position of prominence that went poof during the protracted legal dispute that stifled most of the exploration and development plans during 2020 and again last year. Indeed, a search for "FalCon" on Rio Tinto's website fails to return a single hit, with discussions about diamonds now limited to the company's dwindling reserve at the long-in-the-tooth Diavik operation.
Rio Tinto did mention FalCon in its most recent quarterly production update, although it was hardly a heartwarming acknowledgement. "Activities on the ground at the FalCon diamonds project," the company said, "are limited to care and maintenance while Rio Tinto continues to carry out studies and review information acquired in previous programs." Further, while RTEC could usually be counted on to maintain at least a whisper of chatter with the local communities, pointing out job availabilities and such, silence has prevailed this spring.
Silence is nothing new for Rio Tinto or its subsidiaries. The company is renowned for saying little of substance unless it is in its interest to do so and at this point, silence appears golden as RTEC watches Star Diamond struggle to raise cash just to cover administrative expenses. While it is improbable -- but not impossible -- that RTEC might continue a state of care and maintenance at FalCon this summer, the budget that the company lays out will be the first indication of its desired direction, and its intended speed, at the mammoth project.
The key variable, assuming RTEC indeed wishes to proceed to feasibility and onward to mining in a timely manner, is whether that enormous amount of data supplied to Star was sufficient for RTEC to conclude that Orion South is economic without the expense and delay of another big bulk sampling program using the Bauer trench cutter, which has sat idle since it completed a 10-hole test of the Star pipe in the fall of 2019.
Should RTEC decide that its proposed 20-hole bulk sampling program at Orion South is still needed, then the company may well be proposing another $100-million budget for the FalCon project. The good news, whatever the budget, is that Star Diamond need not worry about raising its share of the costs. While Star is on the hook for its 25-per-cent share, the payment does not come due until after a mine is in production -- unlike its share of the construction costs, which it must start paying six months after RTEC decides to build a mine.
And so, with the setting of a budget just a few weeks away at most, investors are left with much to ponder. Fortunately, the decisions laid out at the coming joint venture committee meeting should telegraph RTEC's intentions at FalCon, no matter if little is said about its actual strategy. A huge budget would signal RTEC is eager to proceed but wants to be sure; a modest budget would suggest RTEC is not as eager, or, as retail shareholders insist, that it is sure enough to press onward without major sampling. As always with FalCon matters: Stay tuned.