Rio Tinto and Star Diamond Corporation have called off a long-running court battle over the development of their joint Canadian exploration project.
“This is a major step forward for the…project, Star Diamond and its shareholders,” Ewan Mason, chair of Star Diamond’s board, said [during the week of December 6]. “We are very pleased to have reached a constructive resolution with Rio Tinto that puts our differences in the past, fully aligns our interests, and allows both of us to singularly focus on jointly and expeditiously moving forward with what Star Diamond believes is one of the most promising diamond projects in the world.”
The two parties have agreed to a revised arrangement that will “de-risk” the Star-Orion South venture for Star Diamond, the junior miner explained. The new agreement puts the onus on Rio Tinto to front the capital for key project milestones until the decision to develop the mine is finalized. In return, Rio Tinto’s share in the project has been upped to 75% from its previous 60% holding, while Star Diamond will retain the remaining 25%.
Under the new terms, Rio Tinto will cover all expenditures related to the project prior to December 31, 2021. It will also put up the funds for any expenses incurred after January 1. Those allocations will continue until a public announcement is made that the two parties will develop the mine. That decision will be based on the results of a feasibility study currently underway at the site.
Once the statement has been issued, Star Diamond will have six months to begin paying its share of the fees to build the mine. After reaching commercial production, Star Diamond can either make payments from the sales proceeds of its portion of rough from the mine or by allowing Rio Tinto to retain its share of diamonds until it is fully reimbursed.
Additionally, if Star Diamond decides to sell more than 50% of its portion of the project, it must allow Rio Tinto the first option to purchase.
In 2017, the Australian mining giant closed a deal with Star Diamond, giving it the right to acquire shares of the mine in the Saskatchewan province of Fort à la Corne. Rio Tinto gave notice it wanted to purchase a 60% stake in the site five years before its original deadline. However, independent legal counsel found that Rio Tinto had not complied with all the terms of the agreement, and Star Diamond considered ending their partnership. In March 2020, Star Diamond initiated legal proceedings against Rio Tinto, seeking to either remove them from the joint venture, or force them to comply with the terms of the agreement.
Photo © Star Diamond Corporation.