Opinions
Peter Hodson
Star Diamond Corporation
DIAM-T
COMMENT
Jun 06, 2017
Stock price when the opinion was issued
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Spent a lot of money on the Fort a la Corne star kimberlites, a very low grade system in Saskatchewan. Their base case is up at the higher end. Even though it is a low grade system, it appears to have potential for larger, high quality diamonds. Although it will require a lot of CapX to develop, one of the new trends in the diamond junior sector is to revisit the kimberlites that are not off scale, and see if they have Type 2A diamonds. When somebody serious start to look at a lower grade system and revisiting it, it is time to pay attention.
He bought this in December and it's been on a tear, because Rio Tinto exercised three options on their property (https://thestarphoenix.com/business/mining/star-diamond-corp-to-start-trenching-operations-at-fort-a-la-corne-sites). DIAM has been grinding through this project for 20 years; it's low-grade, but a very large diamond deposit. There's been a dispute with Rio Tinto (https://thestarphoenix.com/news/local-news/star-diamond-says-rio-tinto-hasnt-complied-with-agreement-on-project-near-prince-albert). The details aren't public, but it's probably over spending commitments. Rio exercised that option at least a year ahead of expectations. He believes Fort a la Corne will be a real project and the Star Diamond project makes sense.
They have option agreements with major partner Rio Tinto, but these have been under dispute for the past year. It's worth tens of millions of dollars. The stock has fallen because of this battle; investors have lost patience. He owned this before the legal battle and didn't want to wait for it to be sorted out.
This has a diamond project in Saskatchewan and have been working on it for more than a decade. It was a pretty decent company and had good potential for future development, but the diamond industry is extremely difficult. Cash needs to be raised and you have to perform up to expectations. A pretty high-risk play.