The giant trench cutter rig is one of the technologies being used by Rio Tinto but Star Diamond has issues with its effectiveness. (submitted photo/Rio Tinto)

By Glenn Hicks

mining feud

Rio Tinto wants to call Project Falcon meeting with Star Diamond as partners await court decision

Jun 21, 2021 | 5:00 PM

As the feuding partners at the Fort à la Corne diamond project east of Prince Albert await a court ruling as part of their wider dispute over their contested joint venture agreement, mining giant Rio Tinto says the project “remains on standby”.

It hopes to present a budget next month of almost $18 million for the next phase of work at the site. That work would cover the period June 2021 to March 2022.

However, partner Star Diamond contends there is no joint venture with Rio Tinto— something the latter maintains does indeed exist— and Star says it disagrees with positions taken by Rio Tinto.

A Saskatchewan court decision is expected soon following a June 4 court hearing that is likely to have a bearing on how work at the project will proceed.

Rio Tinto wants meeting next month

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In a media release Monday, Star Diamond said a notice issued by Rio Tinto on June 17 had “…purported to call a meeting for July 21 for the management committee of the joint venture Rio Tinto Canada claims was previously formed…”

The company said the notice shows Rio Tinto will seek a proposed budget for the period from June 2021 to March 2022 of $17.8 million. The notice also indicates that Rio Tinto Canada will be seeking to add to that budget an aggregate of $64.4 million allegedly spent by Rio Tinto Canada during 2019, 2020 and the first five months of 2021.

“Star Diamond disagrees with the positions taken by Rio Tinto Canada in the June 17, 2021 notice,” the company said. “However, out of respect for the pending court decision in relation to the Undertaking, Star Diamond currently intends to wait for the release of that decision before responding to such notice.”

In response to the Star Diamond statement, Rio Tinto told paNOW Monday the project “…remains on standby, while Rio Tinto evaluates options for future work. Activity into the first half of 2022 is expected to remain focused on technical studies to investigate options for optimal mining methods and maintaining the site.”

The wider legal issue

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.

The immediate court issue – Rio Tinto’s ‘s Undertaking

The wider legal arguments could take beyond this year to resolve in the courts. However, the immediate court decision both parties are awaiting revolves around a court Undertaking Rio Tinto made not to call a management committee meeting for a 120-day period following the completion of the ten bulk sample trenches. In February of this year, Rio Tinto told Star Diamond the 120-day period had started. Star Diamond contests the 120-day period cannot start to run until Rio Tinto Canada has concluded its full report into the diamonds recovered from the bulk trenches, including a comprehensive diamond breakage study. Rio Tinto argues the breakage study does not fall under its undertaking.

Jobs potential for Project Falcon

Star Diamond has said a preliminary economic assessment at the Project Falcon site estimates 66 million carats of diamonds could be recovered in a surface mine over a 38-year project life with a value of $2 billion after tax.

It has the potential to employ 700 people full-time once fully operational.

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glenn.hicks@pattisonmedia.com

Twitter: @princealbertnow