by Greg Klein | December 3, 2014
A proposed Saskatchewan diamond mine cleared a major hurdle with a December 3 decision from Canada’s minister of the environment. Leona Aglukkaq said the Star-Orion South project “is not likely to cause significant adverse environmental effects when the mitigation measures described in the comprehensive study report are taken into account.”
“The minister has referred the project back to the responsible authorities, Fisheries and Oceans Canada and Natural Resources Canada, for appropriate action,” her statement added.
Part of the project’s property is held 100% by Shore Gold TSX:SGF and part by the Fort à la Corne joint venture, in which Shore has an interest. The project has probable reserves of 279 million diluted tonnes averaging 12.3 carats per hundred tonnes for 34.38 million carats. A 2011 feasibility study projected an average price of $242 per carat throughout the mine’s 20-year life. Different sources estimate global averages for rough diamond prices between about $100 and $120 per carat.
The Star and Orion South kimberlites also hold inferred resources totalling 15.7 million carats.
The feasibility’s base case used a 7% discount rate to calculate a net present value of $2.1 billion and a 16% internal rate of return before taxes and royalties. After those deductions, the study found a $1.3-billion NPV and 14% IRR.
Again using a 7% discount rate, the case 1 feasibility found a $3-billion NPV and 19% IRR before taxes and royalties, and a $1.9-billion NPV and 16% IRR afterwards.
Close to southern Saskatchewan infrastructure, the mine would require an initial capital cost of $1.9 billion, with payback in 5.3 years. Over the life of mine, total capex would come to $2.5 billion. The two open pits would take four years of construction.