Star Diamond Corporation (DIAM) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the 2025 Annual General Meeting of the Shareholders of Star Diamond Corporation. My name is Ewan Mason, and I am the Chair, President and CEO of the corporation. In accordance with the bylaws of the corporation, I will assume the position of Chairman for this meeting. This year, the corporation is holding the meeting in a virtual-only format via this live webcast. This format allows participants the ability to attend from virtually anywhere in the world while also reducing the corporation's cost and the meeting's carbon footprint. The following guidelines will assist with the orderly conduct of this virtual meeting. Registered shareholders and duly appointed proxy holders who have properly logged into the virtual meeting portal will be able to vote on each matter once the electronic voting ballot system has been open. Once the voting system has opened, these registered shareholder or duly appointed proxy holders will receive a message on their virtual interface requesting them to register their votes. Please note that there will only be a certain amount of time allowed for voting to take place once the electronic balloting system has been opened. I would also like to note that registered shareholders and duly appointed proxy holders that have already submitted their proxy voting in advance of the meeting do not need to vote again during this webcast. Questions regarding procedural matters or directly related to the motions pertaining to the meeting can be submitted using the instant messaging service of the virtual interface. These questions will be addressed during the formal portion of the meeting. Questions not relating to procedural matters or motions pertaining to the meeting will not, however, be addressed during the formal portion of the meeting. Before we begin the formal business of the meeting, I would like to take a moment to introduce the directors, executive officers, and technical advisers who are in attendance on this webcast. Larry Phillips, Independent Director; and Lisa Riley, Independent Lead Director. I'd also like to thank Marilyn Spink for her service over the last couple of years. She has not stood for reelection. We also have in attendance on this webcast Carmelo Marrelli, our Chief Financial Officer; Mark Shimell, Vice President, Exploration; and George Read, Senior Technical Adviser. Please note that this webcast may contain forward-looking statements or forward-looking information within the meaning of applicable securities laws and direct today's participants to the safe harbor statement on our website and in our public filings. I now propose to deal with the formal aspects of the meeting. To ensure that the meeting covers the required business in an efficient manner, I have prearranged with designated registered shareholders and proxy holders to move and second motions of business. This in no way intended to discourage any comments or questions from other registered shareholders or proxy holders. With the consent of this meeting, I ask John Pringle of McKercher LLP Corporation to act as secretary of the meeting. The first item of business will be the appointment of a scrutineer. For the purposes of this meeting, I appoint Odyssey Trust Company, through its representatives, as scrutineers to compute the votes of any polls taken at this meeting and to report thereon to the Chair. The purpose of today's meeting was set out in the management information circular of the corporation dated March 31, 2025. The notice calling this meeting, the management information circular and the form of proxy were mailed to shareholders on or around April 15, 2025. Our transfer agent, Odyssey Trust has attested to the proper mailing of the notice calling this meeting. Proof of service of such mailing has been provided by Odyssey Trust. I direct that a copy of such proof of service be annexed to the minutes of this meeting. I will dispense with the reading of the notice of meeting. Copies of the management information circular and other meeting materials, including the notice are available under corporation's profile on the SEDAR website. I have been advised that there are voting shares representing more than 5% of all outstanding voting shares of the corporation present, and therefore, a quorum of shareholders of the corporation is present, and the meeting is properly called and duly constituted for the transaction of business. I have received the scrutineer's report, and I direct that their formal report be annexed to the minutes of this meeting as a schedule. I now declare that the meeting has been regularly called and is properly constituted for the transaction of business. As previously mentioned, voting today will be conducted by electronic ballot only. I will now take a moment to ask that the balloting system be opened to registered holders and appointed proxy holders. Now the polls are now open. All registered holders and proxy holders who have properly logged in with their control numbers or user name and wish to vote will be able to see on their screen all of the motions being brought forth at this meeting. As a reminder, if a registered shareholder or appointed proxy holder has previously submitted their votes prior to the meeting, they are not required to resubmit their votes again unless they wish to change the previous vote. I now present to the meeting the audited financial statements of the corporation for the year ended December 31, 2024, together with the report of the auditors thereon. Copies of such documents have been mailed to the shareholders who requested such statements, and it is not proposed to read them. These documents are also available on the corporation's website and, of course, on SEDAR+. Election of directors. We will now proceed with the election of directors. The Board has determined that three directors are to be elected. I will now receive nominations for the election of three directors for the ensuing year or until their successors are elected or appointed.

Mr. Chairman, my name is Brian Desgagnes and I am a duly appointed proxy holder of the corporation. I nominate for election as directors of the corporation the nominees named in the March 31, 2025, information circular, namely, Ewan Mason, Larry Phillips, and Lisa Riley.

Thank you, Brian. As no additional nominations were received in accordance with the advanced notice provisions of the corporation's bylaws, no additional nominees for election to the Board of Directors will be considered. I would also like to note that the Board of Directors has adopted a majority voting policy stipulating that if votes cast in favor of the election of a director nominee are exceeded by the number of votes withheld for such nominee's election, then the director nominees will submit their resignation promptly after the meeting for the Board's consideration. Please be aware that as a result of the majority voting policy, a withhold vote is effectively a vote against a director nominee. I will now ask for someone to move and second the motion to elect those nominated as directors of the corporation.

Mr. Chairman, my name is Brian Desgagnes and I'm a duly appointed proxy holder of the corporation. I move that Ewan Mason, Larry Phillips, and Lisa Riley be elected as directors of the corporation for the ensuing year or until their select successors are elected or appointed and that we now vote individually with respect to each such person.

Seconder? Mr. Karun, I believe that's you.

Yes. Mr. Chairman, I second the motion.

Thank you, Nelson. May I now have a motion to elect Mr. Larry Phillips to hold office until the next Annual General Meeting or until his successor is elected or appointed, subject to the provisions of the corporation's articles?

Mr. Chairman, my name is Brian Desgagnes and I am a duly appointed proxy holder of the corporation. I move that Larry Phillips be elected as a director of the corporation for the ensuing year or until his successor is elected or appointed.

Mr. Chairman, my name is Nelson. I second the motion.

Thank you, Nelson. May I now have a motion to elect Ms. Lisa Riley to hold office until the next Annual General Meeting or until her successor is elected or appointed, subject to provisions of the corporation's articles?

Mr. Chairman, my name is Brian Desgagnes and I'm a duly appointed proxy holder of the corporation. I move that Lisa Riley be elected as director of the corporation for the ensuing year or until her successor is elected or appointed.

Mr. Chairman, my name is Nelson. I second the motion.

Thank you, Nelson. May I now have a motion to elect myself, Ewan Mason to hold office until the next Annual General Meeting or until his successor is elected or appointed, subject to provisions of the corporation's articles?

Mr. Chairman, my name is Brian Desgagnes and I am a duly appointed proxy holder of the corporation. I move that Ewan Mason be elected as a director of the corporation for the ensuing year or until his successor is elected or appointed.

Mr. Chairman, my name is Nelson. I second the motion.

Thank you, gentlemen. I declare that Ewan Mason, Larry Phillips, and Lisa Riley be elected as directors of the corporation to take office immediately following the meeting and to serve until the next Annual General Meeting. Next item is appointment of auditors. The Audit Committee of the Board of Directors of the corporation has approved, subject to shareholder confirmation, the appointment of KPMG LLP, Chartered Professional Accountants for appointment as the auditors of the corporation to hold office until the next Annual General Meeting of Shareholders at such remuneration as may be determined by the Board of Directors. I ask for a motion in that regard.

Mr. Chairman, I nominate KPMG LLP, Chartered Professional Accountants.

Mr. Chairman, I second the motion.

Thank you, gentlemen. We will now provide registered shareholders and duly appointed proxy holders with another minute or so to complete their electronic -- to complete, sorry, their electronic ballots. Once the electronic balloting system closes, the voting page will disappear and votes will automatically be submitted. As a reminder, if you are voting by electronic ballot today, please register your votes by accessing the voting page and selecting the For or Withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of KPMG LLP, Chartered Professional Accountants, as the corporation's auditors. [Voting]

I have been advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor of all the resolutions. I would ask that the scrutineer compile a report regarding the results of voting on all business matters. Results will be published on SEDAR+ and by press release. Further business. The formal items of business as set out in the notice of meeting here have now been dealt with. As there is no further formal business of the meeting, may I please have a motion to terminate the meeting?

Mr. Chairman, I move the meeting be terminated.

Mr. Chairman, I second the motion.

Thank you, gentlemen. I declare the motion carried and the meeting terminated. Thank you. Now we're just going to go into the informal part of the meeting, and we're going to give you a little presentation on our resource upgrade. I just wanted to say it's been a busy year. We told you it would be a busy year. We told you we'd take no prisoners and that's exactly what we've done. But I think it's first most important to understand what happened with the resource after we got 100% of the project from Rio Tinto, which we've never owned by the way. And of course, in concert with that, we did the resource upgrade. And in addition, last year, we also purchased the half of Buffalo Hills project in Alberta which we didn't own. So Mark Shimell, if you wouldn't mind giving a brief presentation on this situation, and then afterwards, I'll have a little chat with you and I'll answer questions. Go ahead, Mark.

Okay. Good morning, everyone. I'm just going to advance the slides through the forward-looking statement, which we've all seen. Okay, so we all know Star Diamond has been advancing the world's largest undeveloped diamond project. We're located in the Fort à la Corne in Saskatchewan, Canada. We have a previous historic PEA, which was completed in 2018, which demonstrated a large long life of mine with 66 million carats over a 30-year mine life, attractive economics, $2 billion and a 19% IRR base case with an initial capital cost payback period of 3.4 years. And also to be pointed out that we're in a very low-risk jurisdiction in Saskatchewan, Canada, near existing power and transportation and all the infrastructure that you would need to build, develop and operate a mine. So in 2024, we successfully completed a revised resource estimate where we've increased the grade of the Star and Orion South Kimberlites, which is the project from 14.7 to 18.6 carats per hundred tonne, increased the carats by 29% and the grade has increased by 26%, and we had a small increase in the tonnage in the resource. The mineral resource integrates diamond data from the underground bulk sampling, LDD, large-diameter drilling programs, Shore Gold-Star Diamond Corporation completed and the trench cutter drilling program, which Rio Tinto performed in the last few years. The trench cutter diamond data exhibits increased diamond grade values due to the efficient liberation and recovery of high-value small diamonds by the installed modern Consulmet bulk sample plant that was used by Rio Tinto Canada. Combined diamond data sets create larger parcels and mitigate risk as a diamond grade estimation. Rio Tinto's parcel increased our diamond parcel by 1,500 carats significant. This mineral resource estimate has shown that only limited improvements in precision can be achieved by additional prohibitively costly bulk sample programs. If you look at the Star Diamond grade curve for the Early Joli Fou, which is the main driver of economics of the kimberlite, you can see the two curves in the underground curve that was produced by Star Diamond Corporation's bulk sample plant. And you can see the Star Diamond grade curve shows increased diamond grade values due to the efficient liberation of modern recovery of higher-value small diamonds by the modern Consulmet bulk sample plant used by Rio Tinto. And its modern advancement of the easy recovery of smaller diamonds could be integrated into the processing plant that will be put together for a PFS and feasibility study. If we look at the next slide, we have one of the coarsest diamond size frequency distributions in the world, combined with unusually high proportions of Type II diamonds. The Fort à la Corne kimberlite also includes some 60 bodies, many of which contain diamonds. Valuation of diamond deposits, dependent on tonnes and grade of diamond price. Diamond price is unique for each kimberlite. Diamond size frequency distributions are also unique to the kimberlite being sampled. The upside of our deposit is in the future production of large diamonds due to the coarse diamond size frequency distribution. Star Diamond Kimberlite has a stone frequency distribution places it amongst two of the most significant large diamond producing mines, Letseng Mines, Lesotho, and Karowe Mine in Botswana. Conceptual studies suggest potential of a monthly exceptional plus 100-carat diamonds and hundreds of special plus 10.8-carat diamonds. To date, the deposit, even within its bulk sample has produced specials and exception diamonds up to 50 carats. So it has quite already proven that these specials exist in the deposit. The proposed pre-feasibility study, which is the next stage after the revised resource estimate and then thereafter, the feasibility study hope to be completed within 2 years. And no additional field work is required for the PFS so once financing is established, we can just start the PFS immediately. We believe that is the last slide of the presentation and update. Let me hand over to Mason, Carmelo, George Read and Mark Shimell. Thank you very much.

Thanks, Mark. Appreciate that. I think it's worthy of note that while we were negotiating the acquisition of the remaining 75% of Fort that we didn't own, the tactical team was working on this resource upgrade, and it's just a fabulous outcome. I really can't say enough about it. Before we get into the Q&A, there's a couple of things I've got to read. I've had an awful lot of inbounds lately from shareholders rightly so, asking what's going on with the financing. So I'm going to read to you a statement that my corporate counsel gave to me this morning. And here it is. The Board has been actively pursuing financing alternatives. We are well down the road with respect to an opportunity that we believe is going to provide a solution to many of the issues facing the company. When we're in a position to announce more details, we will do so. For obvious reasons, we are not able to get into any more detail at this point. So that's kind of lawyer speak for please don't ask me any questions about where we are with the financing. You'll find out soon enough. In addition, we're going to take some questions. [Operator Instructions] And we need to keep the orderly conduct of the meeting together. General shareholder questions that are not part of formal discussion and meetings, items of business may also not be addressed. We will now give registered shareholders, duly appointed proxy holders and guests a moment to submit questions, and then Mark Shimell will read them out and I'll answer them.

Mark Shimell speaking. At this particular point in time, there are no messages on the interface. I think we'll allow time for people to...

Yes, we'll wait another minute or so. And then if there's no questions, we'll terminate the meeting. Brandon, I've just heard from a shareholder that there is no question tab showing up. So if you could check into that, that would be useful. They just don't know how to do it.

So they would need to log in with their shareholder number to actually ask questions. So I can see currently that no one has logged in with that number.

Okay, thank you. Brandon, I have a shareholder asking how do you log in. There's nothing to click on. I would say if we can open this to guests, that would be the way to handle this. Okay, I've been informed that guests can now just ask a question on tab. Brandon, if we can just tell everybody again how to ask a question, that would be appreciated.

[Operator Instructions]

Ewan, I can see messages on my moderator screen. Can you -- now I have one question. Is Rio being a good partner?

Yes. I'm also hearing from other shareholders there was a messaging tab and it's very straightforward.

Yes, I see. I have another question coming in here. When you mentioned financing, are you talking about financing for the PFS or financing for the mine?

Well, naturally, we have to finance the PFS and the FS first, but it will all be tied together at the end of the day.

Okay. Here, it says how long to complete the PFS? I can answer that question. I believe 12 months. I think question, 12 months from when? From financing.

Mark, there's also the plan to maybe morph the PFS to the FS. Maybe give a quick comment on that, too, if you don't mind.

Yes. I mean, subject to financing, we do have the option to progress straight into a feasibility study. The components of the feasibility study and PFS are symbiont. So it's just a question of being -- it just depends on the initial stages of the work as to what may be required to just go -- either can start with a PFS or complete the feasibility study. I do have a question of what will the PFS cost. We've got budgets, had budgets from our contractors, solid numbers with contingency between $2.5 million to $3 million.

And then what does the feasibility cost after that, Mark?

That will be dependent on the initial studies, but we believe that could be between $3 million to $5 million. And again, that just depends on anything that might be identified in the PFS. If nothing is identified in the PFS that it requires additional work or any additional serious engineering, then the feasibility study would obviously be a lot cheaper to complete.

So best case?

Best case, I think -- best case would be an additional $3 million, I think, possibly anywhere between $3 million to $5 million, but $3 million or $4 million.

So in total, less than $10 million, best case?

Yes. To go through the entire PFS, the feasibility study certainly less than $10 million. Yes, sorry, they're just scrolling through them. Any luck selling the Bauer rig and plant? Is there -- is it still the plan to sell?

Well, we haven't had any luck to date. There have been inbounds on it. We've just extended the contract, but we're not counting on it to do anything with respect to funding our operations going forward. We simply don't need it anymore.

Next question. Are there any government environmental First Nations, et cetera, approvals required or are previous approvals still in effect? I can answer that question. Everything is -- we're in good stead with the government, the Ministry of Environment, the First Nations. We will need to update and amend the environmental impact statement but it is an amendment that will be needed to require as it has a lifeline of 5 years before it needs to be amended. But we don't believe that's going to be a particularly difficult process as it's already been federally and provincially approved previously. And we have another question here. When will financing be time line to release? Okay, I believe that was answered. For bringing power to the mine, are you familiar with the time line to bring in high-voltage power to the mine site, having engaged with SaskPower? I can answer that question. We had previously engaged with SaskPower when we did the original feasibility study in 2011. There's still the capacity and the facility to extend the power lines, as was previously presented in the 2011 feasibility study. So that would happen well within the time line from the start of construction to the time of mining. We're only half a dozen kilometers away from the main line. Not got -- okay, there's still some questions that have already been answered. Will Saskatchewan government ever help us financially get to this mine?

Well, the Saskatchewan government has been very helpful already, and we are quite confident that they'll be a great partner going forward. Anything else, Mark?

No, nothing else is coming up.

Okay, great. Well, nothing further then, we will end this webcast. I appreciate all of you tuning in. And stay tuned. Meeting's closed. Thank you, Brandon.

This concludes the meeting. You may now disconnect.