"Ken MacNeill and George Read's Star Diamond Corp.
(DIAM) closed unchanged at 26 cents on 125,000 shares. The wait goes on for a statement of defense from Rio Tinto Exploration Canada (RTEC), the company's estranged co-venturer on the FalCon project in central Saskatchewan. In the meantime, Star Diamond broke its self-enforced silence on the legal dispute late last week, if only to roll out its annual financial report.
In doing so, the company pointed to a lack of information as one of its main concerns, noting that "Star Diamond has not to date been provided with any meaningful data from RTEC's operations at the project." This complaint featured prominently in Star Diamond's statement of claim, where the company alleges that RTEC failed to provide Star Diamond with all non-proprietary data derived from the properties, adding that "in particular, RTEC has failed to provide any results, data or information derived from the bulk sampling program purportedly undertaken by RTEC."
Star Diamond's lawyerly complaint inspires an image of Mr. Read, Star's senior vice-president and undoubtedly the leading expert on the FalCon kimberlites, being left on the outside, his face pressed against a fence, straining to catch a glimpse of what RTEC might be up to. Indeed, the complaint played well with Star Diamond's long-loyal retail backers. They immediately rallied around the flag, previous differences with the company's management forgotten, as they accepted the complaint verbatim.
Still, the company's previous reports suggest a more complex situation. On one score, there is no doubt that data is lacking: RTEC has not provided Star Diamond with the final results of its bulk sampling program at Star. Of course, there is no data yet to provide, as the meaningful results -- thousands of carats of diamonds of all sorts and sizes -- are still sitting in 6,848 individual bags containing an estimated 8,271 tonnes of kimberlite. (The missing diamond results from the incomplete test are likely to be the crux of the data arguments mounted by lawyers from both sides.)
As for the results of RTEC's several drill programs at FalCon, if Star Diamond is missing key data, it might have a chat with Mr. Read. Rio Tinto has in fact completed several costly drill programs on the FalCon project over the past few years, starting just months after the two companies signed their option agreement in 2017. Indeed, according to the boilerplate in its news releases, Star Diamond has had access to the program, and it had an active role in the programs. There have, however, been subtle changes to that boilerplate over the past few years that might add colour to the story.
With the first program, begun late in 2017, Star said that geologists from both companies were responsible for supervision of the drilling and the subsequent core logging. With drilling a year later, RTEC geologists were responsible for the supervision of the drilling program, while Star Diamond and RTEC geologists were to handle the subsequent detailed core logging. Most recently, with drilling a year ago at Orion South, RTEC geologists handled it all, with Star Diamond's geologists left to complete an "independent logging of the core."
It is unclear whether that shift is merely the natural result of RTEC's crew finding its own way at FalCon, or whether it shows a deteriorating relationship between the two companies. What is clear, is that any possible discord in that relationship has moved from the FalCon core shack to the Court of Queens Bench in Regina -- not an encouraging development. "