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Diamond & Specialty Minerals Summary for January 30, 2023

by Will Purcell

The diamond and specialty minerals stocks box score for Monday was a so-so 93-111-106 as the TSX Venture Exchange fell four points to 617. Ewan Mason's Star Diamond Corp. (DIAM) closed unchanged at 10.5 cents on a paltry 15,000 shares.

The company's stock began 2023 like it left 2022 -- in the dumps -- but the mood among the company's crew is on the upswing. Last week, the company cheered what will be its first appearance in years at the Prospectors and Developers Association of Canada (PDAC) convention, scheduled for early March. Now, Mr. Mason, Star's chairman since 2020 and president and chief executive officer since the start of the year, says he expects to have something new to cheer at the dog and pony show.

No, long-time shareholder, Rio Tinto Exploration Canada Inc. (RTEC) is not going back to work at their mothballed FalCon project in central Saskatchewan, and no, RTEC's parent company is not dangling a buyout offer for Star or for its 25-per-cent piece of the project. Rather, Mr. Mason suggests, he is looking to put the past five years behind his company and so his focus, over the shorter term at least, will be on the FalCon diamonds themselves -- gems he describes as exceptional.

RTEC is still there, contract bound of course, but it appears to have disbanded most of its Saskatoon-based diamond group -- presumably at the direction of its parent company, which issued the out-of-the-blue directive late last June to shut down the FalCon exploration program and put the project on care and maintenance. While that move shocked Star Diamond, the market -- and apparently the fellows at RTEC as well -- Rio Tinto is increasingly intent on pursuing its intended exit.

Mr. Mason says that his company and RTEC are still engaged in a "back and forth" discussion on the key details of Rio's looming exit, and while he is limited in what he can say, he does say that the talks are moving along and are "not at square-one." While RTEC's departure was packaged as a potential exit last June, it was arguably upgraded to all-but-guaranteed in October, when it said it would fully demobilize the leased on-site camp in early 2023. Mr. Mason now says that RTEC has finished its demobilizing work, adding that "they took what they were going to take."

One item they have not taken -- and undoubtedly one that is a key item up for discussion -- is the Bauer trench cutter and its ancillary equipment. Mr. Mason said he was unable to comment on RTEC's plans for the equipment, other than there were several possibilities, "some that we are in favour of and some we are not." Losing access to the Bauer is not ideal for Star if it hopes to retest the Orion South kimberlite, but neither is being on the hook for sending the rig back to Germany.

The cost to get the rig and its supporting equipment to the FalCon site from Germany was "astronomical," Mr. Mason says, in part because of all the supporting accessories and equipment, and also because it is "very, very heavy." Mr. Mason undoubtedly would like to have the Bauer rig to use and not have to pay for its eventual return, and he arguably has negotiating room: The original option agreement with RTEC clearly laid out that the costs of mobilization and demobilization associated with the Bauer would not be included in RTEC's allowable expenditures.

While Mr. Mason believes that the (many now apparently former) RTEC employees were believers in the FalCon project, he says that parent Rio Tinto "is of a different mindset." As for what lies ahead, investors should expect a new direction. "When we get the ... when we get the project back, Mr. Mason said, circling back to emphasize the "when" rather than the market's still-presumed "if -- "we will not be looking for another miner as a partner."

Mr. Mason has been mulling potential new partners to be sure, but his list includes financiers, governments and first nations groups at the top of the list. With Star Diamond's looming new promotion based on the gems, not on how they will find their way out of the ground, the company may also be out to woo jewellers -- the likes of Tiffany & Co. for instance, which have been willing off-takers and investors in the past.

As for that new direction, Mr. Mason says to stay tuned for the story to develop, sooner rather than later. He did dangle a hint, noting that the early investors in the company were and remain preoccupied by the mining aspect of the project. New investors in the company, he hopes, will be "hung up on the bling aspect" of the project. Indeed, with Star Diamond intending to make a promotional splash, showing off its FalCon gems at PDAC in barely a month, expect Mr. Mason to be busy over the next few weeks.

Keith Morrison's Premium Nickel Resources Ltd. (PNRL) slid 13 cents to $1.89 on 186,000 shares. The company has drilled a 16.75-metre interval averaging 1.0 per cent nickel, 2.05 per cent copper and 0.04 per cent cobalt -- 1.72 per cent nickel equivalent -- in one of two new drill holes at its Selebi project in easternmost Botswana. The second hole returned lesser grades over a narrower interval. These are the final assays from the deep drilling program, with results that are essentially in line with the earlier assays.

Mr. Morrison, CEO, says that the previous drilling at Selebi revealed substantial expansion potential and continuity along strike, downdip and downplunge of the now seven-year-old resource estimate. While those earlier holes were drilled to test the upside potential of the mineralization, Mr. Morrison says that the latest two tests were drilled updip and downdip of previous mineralization. This work he concludes, stepping gingerly through a field of hungry weasels, is allowing the company to "progress toward defining a potential inferred mineral resource that may be used in a future preliminary economic assessment."

Selebi was a long-running mine, operating from 1980 to 2016,during which time it produced 26.6 million tonnes of ore averaging 0.58 per cent nickel and 1.03 per cent copper. As well, mining began from the Selebi North shaft in 1990 and ran until the entire operation was shuttered seven years ago, yielding 13.6 million tonnes at 0.74 per cent nickel and 0.66 per cent copper. Both shafts had been on care and maintenance since then, as the previous operator went bankrupt. (Premium Nickel was the successful bidder in the liquidation process in mid-2020, and it formally acquired the project a year ago.)

Jim Gallagher's Clean Air Metals Inc. (AIR) is a long way from its high of 48.5 cents set early in 2021, and since last fall it has been hugging the 12-cent mark like a hungry boa that just happened upon a lizard. While it does not move much, it trades in spurts and one of those came today, as Clean Air added one-half cent to 12 cents on 2.62 million shares. The plus-two-million-share days have been more frequent this month as investors await news from its Thunder Bay North nickel and PGE project.

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