Impact: Very Positive
Star Diamond (DIAM) has signed a binding agreement to acquire Rio Tinto’s (ASX:RIO, Not Rated) 75% interest in the Fort à la Corne diamond project in Saskatchewan. In consideration, Star will issue a certain number of shares such that Rio Tinto will own 19.9% of Star’s outstanding shares. We note that Rio Tinto currently owns 2.3% of Star Diamond’s shares. In our opinion, this is a positive, transformative deal for Star Diamond. The 19.9% share ownership equates to a value of ~C$7M at Star’s market capitalization at the time of the announcement. Including the C$4M payment to Star, the net acquisition price for Rio Tinto’s interest is ~C$3M. This is a low price to pay for 75% of Fort à la Corne, which is one of the pre-eminent diamond development projects globally.