26
INVESTOR PRESENTATION Q2 2014 ADVANCING DIAMOND PROJECTS TO PRODUCTION IN WEST AFRICA
INVESTOR
PRESENTATION
Q2 2014
ADVANCING DIAMOND PROJECTS TO PRODUCTION IN WEST AFRICA
2
DISCLAIMER
This presentation is being made by or on behalf of Stellar Diamonds Plc (“Company”). This presentation has not been approved for issue as a financial
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Daniel Stewart & Company plc (“Daniel Stewart”) is acting in the provision of corporate finance business to the Company, within the meaning of the
Financial Conduct Authority’s Conduct of Business Sourcebook (“COBS”), and no-one else in connection with the proposals contained in this Presentation.
Accordingly, recipients should note that Daniel Stewart is neither advising nor treating as a client any other person and will not be responsible to anyone
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proposals contained in this Presentation.
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By receiving and/or attending this presentation, you agree to be bound by the restrictions in this disclaimer.
If you are in any doubt about the investment to which this presentation relates, you should consult a person authorised under FSMA who specialises in
advising on the acquisition of shares and other securities.
3
AIM listed African focused diamond company with a portfolio
of development projects in the prolific diamond regions of
Guinea and Sierra Leone
Mandala 100tph DMS processing plant
4
PORTFOLIO OF ASSETS
TONGO PROJECT
SIERRA LEONE
Stage: Definitive Feasibility Study
Dyke 1 (of 4): Initial resource: 1.074M cts
High grade: 134cpht
Diamond value: US$248/ct
NPV10
: US$53M
BAOULÉ PROJECT
GUINEA
Stage: Trial Mining
Early cash flow generation potential
Estimated grade: between 13 & 40cpht
Estimated diamond value: over US$200/ct
ADDITIONAL PROJECTS
MANDALA MINE
Guinea: est. alluvial resource of 200,000 cts
KONO*
Sierra Leone: advanced kimberlite trial mining
DROUJBA
Guinea: 2.9M ct resource *Licences under dispute
Baoulé
Tongo
Kono
Droujba
Mandala
Potential for significant resource
increase from additional projects
5
STRATEGY
Commence
trial mining at
Baoulé
kimberlite pipe
in Guinea for
early cash flow
generation
Continual
progress
towards
delivering a
DFS at high
grade
kimberlite
Tongo project
in Sierra Leone
Targeting
early
production and
future
aggregate
resource base
of 7.5m cts
with in-situ
value of US$1
billion
6
KEY DATA*
Market EPIC Share
Price
Shares in
Issue
Market
Cap
52 Week
price range
Share
Options
Warrants
Outstanding
Fully
Diluted
AIM STEL 1.3p 698,007,642 £8.73m 0.75 – 3p 64,276,150 159,344,786 922,228,578
Foradex Invest SLR 23.18%
UBS Deutschland (private) 9.18%
Nassim Funds 6.32%
Hottinger 6.05%
BlackRock 5.07%
Aureus Mining 4.41%
Directors & Management 4.86%
Other 40.93%
Share price graph Major Shareholders
* As at 18.06.14
7
BOARD OF DIRECTORS
KARL SMITHSON, CHIEF EXECUTIVE OFFICER Geologist and MBA with 25 years’ African diamond
exploration and development experience, including 12 years in West Africa. Senior management
positions with De Beers, SouthernEra and African Aura Mining.
LORD DARESBURY (PETER), NON-EXECUTIVE CHAIRMAN Involvement in emerging markets since
1994. Previously Non-Executive Chairman of De Vere Group plc 2000-2006, Chairman of
KazakhGold Group Ltd 2005-2007 and Executive Chairman of Highland Gold Mining Ltd 2002-2004.
JAMES CAMPBELL, NON-EXEC DIRECTOR Mining geologist and MBA with 26 years’ experience in the
diamond mining industry under De Beers, where he held a number of senior positions. Previously
Managing Director of African Diamonds Plc. CEO and President of Rockwell Diamonds.
LUIS DA SILVA, NON-EXEC DIRECTOR CEO of GB Minerals (TSX.V) and Non-Executive Director of
Aureus Mining. Mining Engineer and MBA with operational, technical and corporate experience
globally with Blue Circle Industries and Lafarge SA.
STEVEN POULTON, NON-EXEC DIRECTOR Mining geologist previously with Mano River. Co-founder
of Ariana, African Aura, Afferro Mining, Aureus Mining and Altus Strategies (CEO).
DR. MARKUS ELSASSER, NON-EXEC DIRECTOR An experienced financer and investor in the natural
resources sector. Director of Kopi Goldfields, Stellar Resources Ltd and Impact Minerals. Currently
head of the Elsässer Family Office.
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MANAGEMENT TEAM
ROWAN D. CARR, CHIEF OPERATING OFFICER Rowan has 28 years of diamond industry experience throughout
Africa. He spent 21 years working for De Beers Group Exploration in senior management positions heading up
exploration efforts across the continent. Rowan joined Stellar in 2007 and has been at the forefront of project
exploration, mining and development on the ground
PHILIP KNOWLES, CHIEF FINANCIAL OFFICER Philip joined Stellar in June 2011. He is a qualified accountant with
over 10 years of accountancy experience. Most recently Philip was Group Financial Controller for Firestone Diamonds
plc and for Kopane Diamonds plc, and brings with him strong experience of working for growing diamond mining
companies.
GRAHAM C. RADBURND, TONGO PROJECT MANAGER Graham’s early career was focused in the civil construction
sector in Africa and the Middle East. He also brings 13 years of diamond industry experience in both production and
management roles in Angola, DR Congo, Russia, Guinea and Sierra Leone. Graham joined the Stellar team in 2008.
ALKALY YANSANE, COUNTRY REPRESENTATIVE, GUINEA Alkaly is a Guinean national with a degree in geology. He
was the Director of the CPDM in Conakry for a number of years, responsible for many aspects of the mineral sector.
He also worked for 16 years in the private sector of the exploration and mining industry with Rio Tinto, West African
Diamonds and now Stellar.
ABDULAYE DIALLO, SENIOR GEOLOGIST, BAOULÉ PROJECT Abdulaye is a Guinean national with a degree in mining
geology. He previously worked with Mano River Resources as project geologist exploring for gold and diamonds in
Guinea, Sierra Leone and Liberia. Abdulaye joined Stellar in 2007 and is currently responsible for the drilling project
at Droujba.
KASSIM MANSARAY, SENIOR GEOLOGIST, SIERRA LEONE Kassim is a qualified geologist with +30 years of industrial
experience. He brings a vast wealth of multi-commodity experience having worked in Sierra Leone, Liberia, Guinea,
Gabon and the Central African Republic, having spent the past 15 years with the Mano River-Stellar Diamonds group
of companies.
SULAIMAN SWARAY, SENIOR GEOLOGIST TONGO PROJECT Sulaiman is a Sierra Leone national with a degree in
Geology. He was previously project geologist in a regional diamond exploration JV with BHP Billiton and joined
Stellar in 2004 and . This led to the discovery and development of the Tongo kimberlites. Sulaiman is now project
geologist for the resource estimation programme.
FODÉ CAMARA, CONAKRY OFFICE MANAGER Fodé is a Guinean national with a degree in geology. He has 16 years
diamond industry experience, 12 of which was with De Beers in senior positions in Guinea, South Africa, Botswana,
Zimbabwe, Madagascar, Gabon and DR Congo. Fodé joined Stellar in 2008 and is currently project manager at the
Mandala mine.
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BAOULÉ PROJECT, GUINEA:
A SNAPSHOT
22Mt
Modelled
Large tonnage
potential
Objective:
early stage
cash flow
5 hectare
Diamondiferous
Kimberlite
Pipe
US$200/ct
internal diamond
value estimation
Targeting
initial 2,000
carats per
month
13-40cpht
internal grade
estimation
Open pit
mine
potential
Large stone
potential in
Aredor Region
Advancing
to trial
mining in
H2 2014
10
BAOULÉ KIMBERLITE PROJECT:
GUINEA
Located in renowned Aredor
diamond region of Guinea
Downstream of Baoulé Pipe a diamond
resource has been identified by SRK
with values in excess of US$400 per
carat including 100 carat stones
Potential to secure other
diamond assets in the region as
Stellar is the only serious
diamond company present in
Aredor area
Baoulé Pipe
11
AREDOR: GUINEA
LARGE STONE PRODUCING AREA
Historically produced the largest and highest value
diamonds in Guinea
Numerous high quality diamonds in excess of 100
carats recovered from commercial alluvial mining
operations
In 1990s Aredor FCMC mined alluvial diamonds
with average values of over US$400 per carat 7km
downstream from the Baoulé pipe
Year Diamonds US$ /ct Selling Price (US$)
1986 121.13 1,501/ct 181,855
100.30 15,533/ct 1,558,000
57.83 12,226/ct 707,065
1987 142.96 25,560/ct 3,654,000
1988 181.77 47,412/ct 8,618,177
1989 255.61 39,263/ct 10,036,000
1991 192.95 16,325/ct 3,150,000
1993 22.52 81,705/ct 1,840,000
284.96 28,442/ct 8,105,000
1997 70.10 39,443/ct 2,765,000
1999 146.00 13,507/ct 1,972,000
2000 25.73 51,185/ct 1,317,000 (pink)
16.91 46,008/ct 778,000 (pink)
12
BAOULÉ KIMBERLITE:
RESOURCE DEVELOPMENT
Relocate Mandala 100tph processing plant to Baoulé site
Plant capable of recovery of large, high value stones
Stockpile in advance of plant commission
Commence trial mining – early stage cash flow
Diamond grades and values will be quickly established
Future resource development
internal resource estimate of 3 million carats at US$200 per carat for
in-situ value of US$600 million
Diamond diggings over Baoulé
Identifying suitable locations for the plant, stockpile, workshop & fuel depot
Baoulé
pipe
Sonaferia
village & Base
Camp
Mandala 100tph processing plant
13
PROGRESS AT BAOULÉ:
PLANT RELOCATION
Stellar is in the process of dismantling and relocating its 100 tonne per hour DMS
processing plant which was used for mining at the Mandala alluvial diamond
project in Guinea. In addition, the 5 tonne per hour DMS sampling plant located at
the Droujba diamond project in Guinea has already been dismantled and is about
to be transported to Baoulé
14
PROGRESS AT BAOULÉ:
ROAD REHABILITATION
Stellar is in the process of rehabilitating the road between Baoulé and
Mandala in order to transport the equipment
15
BAOULÉ:
LOCATION OF INSTALLATIONS
Sonaferia
village
Treatment
Infrastructu
re area (16
hectares)
Military
camp
5 hectare
kimberlite
deposit
outline
Stellar-
Tassiliman
JV Camp
Fuel
depot West Lobe
stockpile
East Lobe
stockpile
Plant
Workshop
This site was originally selected as
being suitable for the location of the
plant, however since February, the
area has been overrun by diggers
Former diggings will act
as decanting / settling
ponds prior to
discharging DMS plant
effluent into the Baoulé
river
1km² Permit
perimeter
16
BAOULÉ:
BLOCK MODEL EASTERN LOBE
17
TONGO PROJECT: SIERRA LEONE
DYKE-1: A SNAPSHOT
Current scoping study
NPV10
US$53.1M
32% IRR
1.1 million carat
JORC
Compliant Resource
for Dyke-1 only
High grade
diamonds
recovered from
sampling averaging
134cpht to date
Low Cost
US$16 million
Starting capex
Evaluation
of early
cash flow
options
Located in one of
Sierra Leone’s
premier diamond
districts
17 year
Life of Mine
DFS bulk
sampling
programme
in progress
3 remaining
dykes to drill
for additional
resource
18
Four diamondiferous
dykes located in the
Kenema District of the
Eastern Province of
Sierra Leone in the
heart of the prolific
Tongo Diamond Fields
TONGO KIMBERLITE PROJECT:
SIERRA LEONE
MAIN Length
(km)
cpht US$/ct
Dyke-1 2 134 248
Dyke-4 1 110 140
UPSIDE Lengt
h (km)
cpht US$/ct
Dyke-2 1 140 -
Dyke-3 0.5 185 -
Kimberlite Metres
Depth
Grade
cut-off
(mm)
Resource
tonnes
Grade +1mm
(cpht)
Inferred JORC
carats in
resource
Modelled average
diamond value
(US$/ct)
Implied
contained value
US$m
In-situ value
US$/t
Dyke-1 300m +1.0mm 895,000 120 1,074,000 248 266 298
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DYKE-1: POSITIVE INITIAL
ECONOMIC SCOPING STUDY 2013*
Life of mine (years)
17
Tonnes mined
1,738,000
Carats recovered
1,051,000
Starting diamond price (US$/ct)
248
Initial capital (US$m)
16
Nominal cost per tonne (US$)
69
Life of mine gross cash flow
(US$m)
412
NPV (10%) pre-tax (US$m)
53.1
IRR pre-tax
32%
*Paradigm Project Management & Director model preliminary economic scoping study July 2013
Robust economics indicated in independent
economic scoping study by Paradigm Project
Management for the development of an underground
diamond mine
Tongo 5tph DMS plant
6.70 carat stone from Tongo Dyke-1 March
2014
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TONGO DYKE-1 ON-GOING
DEFINITIVE FEASIBILITY STUDY
Tongo Dyke-1 diamonds February 2014
Progress to Date
2,150 tonnes of material delivered to the
sample stockpile
Sample processing commenced using
Stellar’s on-site 5tph DMS plant
Previous results established a grade of
120cpht at US$248 per carat from 1,050
carat parcel
Sample processing has yielded 730 carats
from 1,271t kimberlite to date for an
average grade of 134cpht – anticipated
increase on re-processing
Outstanding quality of diamonds
classified as 77.63% gem quality (average)
– several +1 carat in size including a 6.7
carat stone
Remaining Milestones for Delivery
Continued bulk sampling - objective to recover
minimum 1,000 carat parcel for diamond grade and
value modelling
Drilling to increase resource to indicated status and
targeting an additional 500,000 carats from Dykes 1
and 4
Environmental and Social Impact Assessments
Mine planning and process plant design
Capital and operational budgeting
Financial modelling
Significant progress
towards delivery of a
Definitive Feasibility
Study for Tongo Dyke-1
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ADDITIONAL ASSETS:
VALUE UPLIFT POTENTIAL
Droujba Project:
Guinea
Kono Project: Sierra
Leone
Mandala Project:
Guinea
• Kimberlite pipe and
dyke with 2.9M carat
resource
• Grades of 88cpht
(Droujba pipe) and
140cpht (Katcha dyke)
• Economic scoping
study completed
• Project on C&M until
higher diamond prices
• Underground trial
mining on two
kimberlites that
yielded over 4,000
carats of high quality
diamonds
• Licence dispute with
Ministry of Mines –
Stellar continues to
pursue diplomatic and
legal remedies to
recover the licences
• Alluvial mining
licence renewed (5yrs)
• Restart production on
improvement in rough
diamond prices
• Previous mining
yielded 128,000 carats
at a grade of 33cpht
with gems up to 37
carats
• Estimated 200,000 cts
remaining in resource
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INTERNAL RESOURCE TARGET:
7.5 MILLION CARATS
CURRENT
RESOURCE TONNES
GRADE
(cpht) CARATS
DIAMOND
VALUE
($/ct)
CONTAINED
VALUE ($m)
PROJECT
STATUS
TONGO 895,000 120 1,074,000 248 266 Feasibility
DROUJBA 3,960,000 63 2,474,000 45 111 C&M
KATCHA 319,000 140 446,000 57 25 C&M
TOTAL 5,174,000 3,994,000 402
TARGET
RESOURCE TONNES
GRADE
(cpht) CARATS
DIAMOND
VALUE
($/ct)
CONTAINED
VALUE ($m)
PROJECT
STATUS
TONGO 1,250,000 120 1,500,000 248 372 Feasibility
BAOULÉ 23,000,000 13 3,000,000 200 600 Resource
SUBTOTAL 24,250,000 4,500,000 972
DROUJBA 3,960,000 63 2,474,000 45 111 C&M
KATCHA 319,000 140 446,000 57 25 C&M
TOTAL 28,529,000 7,420,000 1,108
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THE DIAMOND MARKET
During the next 10 years, growing GDP and urbanisation in emerging markets plus
shifting consumer tastes will drive rough diamond demand
Global demand for rough diamonds is forecast to grow annually by a rate of 5.9%
Diamond supply, from existing or new mines, is predicted to grow annually by only
2.5% until around 2018 when global production will level off and probably decline
This supply-demand imbalance will drive diamond price inflation
Source: Bain; 2013
US$bn
6
8
10
12
14
16
18
20
20072008200920102011201220132014201520162017201820192020
Rough
demand
Expansion
s
& new
supply
Establishe
d
rough
supply
Source: Harry Winston
Demand &
Supply
Production
24
2014 MILESTONES
ACTIVITY
Q1
2014
Q2
2014
Q3
2014 Q4 2014
On-going bulk sampling of Tongo Dyke-1
Bulk sample processing results from Tongo Dyke-1
Relocate plant & site establishment at Baoulé
Trial mining at Baoulé
Diamond value modelling at Tongo Dykes 1
Diamond value modelling at Baoulé
Baoulé internal resource statement
REDUCING RISK AND CREATING VALUE
Baoulé
Tongo
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INVESTMENT OPPORTUNITY
Robust outlook for rough diamond market. Stellar is ideally positioned as new
producer to benefit from continued rough diamond price increases
PROJECTS
EXPERIENCE
Advancing two diamond projects with multi-million carat potential to production
in West Africa with a focus on imminent trial mining at Baoulé to generate early
cash flow
ADDRESS
Focused on prolific diamond regions of Guinea and Sierra Leone with new
acquisition/growth opportunities in West Africa
OPPORTUNITY
Stellar continues to create significant project value which is beginning to
crystallise into rapid company growth
Board and management has extensive experience in the diamond sector and West
African region and has a track record of project delivery
Creating a defined path to near term production at Baoulé. Targeting an overall
resource base of 7.5m carats across portfolio with an in-situ value of US$1billion
MARKET
VALUE CREATION
26
CONTACT
STELLAR DIAMONDS PLC
355 The Strand
London
WC2R 0HS
KARL SMITHSON
Chief Executive Officer
Tel: +44 (0) 77 837 0971
Email: [email protected]
PHILIP KNOWLES
Chief Financial Officer
Tel: +44 (0) 755 744 4007
Email: [email protected]
LOTTIE BROCKLEHURST / HUGO DE SALIS
St Brides Media & Finance Ltd (Financial PR)
Tel: +44 (0) 20 7236 1177
Email: [email protected]
COLIN ROWBURY / ANTONY LEGGE
Daniel Stewart & Company Plc
Tel: +44 (0) 20 7776 6550
Email: [email protected]
Tongo Dyke-1 Diamonds
