This aerial image shows the construction of the Bulk Sampling Plant earlier this year where the huge bags of kimberlite samples (in top of image) are being processed to get an idea of the quantity and quality of diamonds in the sample. (Star Diamond Corp.)

By Glenn Hicks

diamond battle

Star Diamond can take Rio Tinto case to trial but ‘faces uphill battle’: judge

Aug 12, 2020 | 8:00 AM

A Saskatchewan court has found Star Diamond does have grounds to take its legal fight with Project Falcon partner Rio Tinto to trial but could struggle to win it. Star Diamond said it believes it can show “Rio Tinto’s misconduct and breach of the option agreement.”

A 29-page ruling seen by paNOW was published Aug. 10 following a two-day hearing June 29 and 30. Justice G.M. Currie with the Court of Queens Bench in Saskatoon also dismissed Star Diamond’s call for an interim injunction. That means there will be no restrictions put on Rio Tinto as processing of the exploration finds continues at the Fort à la Corne site east of Prince Albert.

Star Diamond has made various claims against Rio Tinto including that it breached the conditions of their options agreement which ultimately gives Rio Tinto a 60 per cent stake in the project, misrepresented the costs involved in the very expensive exploration work, and had used its significant financial resources… “and engaged in bad faith predatory practices… with a view of diluting Star Diamond’s interest in the properties.”

Rio Tinto denies the allegations.

Star Diamond also claimed it would face harm for which it could not be compensated if the injunction was not granted, but the judge said he had reservations about that and “I perceive a substantial risk of irreparable harm to Rio Tinto if the injunction is granted.”

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The hearing in June saw various testimony through affidavits about some of the background to the joint venture arrangement agreed between Star Diamond and Rio Tinto.

Judge casts doubt on potential success

Justice Currie said I was not his job to resolve questions of contract interpretation, as that was a matter for the trial judge, but he did find Star Diamond had raised serious questions on some matters that should be tried in court.

However, the judge noted on some of the claims, that “on the basis of the evidence that is before me I conclude that Star Diamond faces an uphill battle in proving its case.”

In a media release following the judge’s findings Star Diamond said, in part, the court had found it [Star Diamond] “…had successfully met its onus of establishing a serious issue to be tried” with respect to its various claims. Star Diamond cautioned however there was no assurance the court would find in the company’s favour.

Star Diamond added the court had not yet established a timeline for further hearings on the legal proceedings.

Star Diamond believes it will win case

In an email to paNOW Star Diamond said, in part:

Justice Currie’s comment about an uphill battle reflects an assessment at an early stage of the proceeding, based on limited affidavit evidence that was not tested through cross-examination. Even at trial, a judge may find for one party over the other while not agreeing with all of the arguments made by the successful party. The hearing on the merits will proceed with a full evidentiary record, including live witnesses, that Star Diamond believes will be sufficient to prove Rio Tinto’s misconduct and breach of the option agreement.

paNOW contacted Rio Tinto. It said it would not comment on the case given it is an ongoing legal matter.

As for operations at Project Falcon a Rio Tinto spokesperson said “we are continuing with our work program…with the processing of exploration results successfully underway.”

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glenn.hicks@jpbg.ca

On Twitter:@princealbertnow