Star Diamond to acquire Rio Tinto’s 75% interest in Fort a la Corne project

Star Diamond Corporation announced that it has entered into a binding agreement with Rio Tinto Exploration Canada, providing for the transfer by RTEC to Star Diamond of all of RTEC’s 75% interest in the Fort a la Corne diamond project located in central Saskatchewan. The Agreement provides that, upon closing: RTEC will transfer to Star Diamond all of RTEC’s 75% interest in the Project, such that the Project will be 100% owned by Star Diamond; RTEC will transfer to Star Diamond ownership of the trench cutter drill rig used by RTEC to complete its prior bulk sampling program at the Project; RTEC will transfer to Star Diamond the Bulk Sample Plant located at the Project, including the TOMRA XRT diamond sorting machine that is on-site; Star Diamond will issue to RTEC and/or an affiliate that number of common shares of Star Diamond that results in RTEC and its affiliates owning 19.9% of the then outstanding common shares of Star Diamond (RTEC and its affiliates currently own approximately 2.3% of Star Diamond’s outstanding common shares); and RTEC and Star Diamond will enter into an Investor Rights Agreement whereby, among other things, RTEC will be granted certain pre-emptive rights to maintain its 19.9% ownership interest in Star Diamond in connection with future financings undertaken by Star Diamond, and RTEC will agree to certain standstill protections provided that RTEC will have the right to increase its 19.9% ownership position in the event that Star Diamond receives an acquisition proposal. “Acquiring 100% ownership of the Project will be a major accomplishment for Star Diamond and its shareholders. We are grateful to Rio Tinto for the significant monetary investment and expertise it has contributed to the Project over the past more than five years, which has meaningfully advanced what Star Diamond believes is one of the most promising diamond projects in the world,” said Ewan Mason, President and Chief Executive Officer of Star Diamond. Upon completion of the transactions that are the subject of the Agreement, Star Diamond will have full control and responsibility for the Project, the existing joint venture agreement between RTEC and Star Diamond will terminate, and Star Diamond will release and indemnify RTEC for liabilities arising from or relating to the Project, all in exchange for a Cdn. $4 million payment from RTEC to Star Diamond. RTEC has agreed that it will provide on Star Diamond’s behalf, for up to five years following closing, letters of credit in the aggregate amount of no more than Cdn. $9.9 million to secure certain environmental remediation and reclamation obligations related to the Project. Star Diamond will be obliged to repay any amounts drawn on these letters of credit and such repayment obligations will be secured against the Project and its assets.