Introduction

Star – Orion South Diamond Project High Value Stones

Star – Orion South Diamond Project High Value Stones

Highlights

During 2018, Star Diamond Corp. announced the positive results of the independent Preliminary Economic Assessment (“PEA”) on the Star and Orion South Kimberlites, on mineral dispositions held 100% by Star Diamond Corp. (see Star Diamond Corp. News Release dated April 16, 2018 and Technical Report dated May 30, 2018). The PEA estimates that 66 million carats of diamonds could be recovered in a surface mine over a 38-year Project life, with a Net Present Value (“NPV”) (7%) of $2.0 billion after tax, an Internal Rate of Return (“IRR”) of 19% and an after-tax payback period of 3.4 years after the commencement of diamond production.

The PEA Highlights Include 1.:

The PEA was led by independent mining, processing and design consultants, with support from the Star Diamond technical team. The principal consultants include: SGS Canada Inc. - Geostat (“SGS”); DRA Americas Inc. (“DRA”) and ENGCOMP Engineering and Computing Professionals Inc. (“ENGCOMP”). A number of other independent consulting firms and potential vendors also provided their study results to Star Diamond for use in developing the PEA. All currency amounts are quoted in Canadian Dollars, unless otherwise stated.

The PEA is based on the Revised Mineral Resource Estimate as documented in the NI 43-101 Technical Report: Technical Report and Revised Resource Estimate for the Star – Orion South Diamond Project Fort a La Corne area, Saskatchewan, Canada December 21, 2015 3.

Attractive evaluation diamond parcel

Project is close to established infrastructure: road accessible year round, future connection to grid power, skilled and semi-skilled human resources available

Project Environmental Impact Statement was prepared for the Province in Dec, 2014

Summary

The Star-Orion South Diamond Project (the "Project") is located in central Saskatchewan some 60 kilometres east of the city of Prince Albert. The Project is in close proximity to established infrastructure, including paved highways and the electrical power grid, which provide significant advantages for future mine development.

Star – Orion South Diamond Project Evaluation

Star – Orion South Diamond Project Evaluation

On June 22, 2017, Star Diamond Corp. acquired (the "Newmont Acquisition") from Newmont Canada FN Holdings ULC ("Newmont Canada") all of Newmont's participating interest in the Fort à la Corne joint venture (the "FalC JV"), resulting in Star Diamond Corp. owning 100% of the Fort à la Corne mineral dispositions (including the Star - Orion South Diamond Project), and has concurrently entered into an Option to Joint Venture Agreement (the "Option Agreement") with Rio Tinto Exploration Canada Inc. ("RTEC") pursuant to which the Company has granted RTEC an option to earn up to a 60% interest in the Project on the terms and conditions contained in the Option Agreement (see Star Diamond Corp. News Release dated June 23, 2017).

The Newmont Acquisition was completed pursuant to a Participating Interest Purchase Agreement effective as of June 22, 2017 between Star Diamond Corp., its wholly owned subsidiary, Kensington Resources Ltd., and Newmont Canada whereby Newmont Canada sold its entire interest in the FalC JV to Star Diamond Corp. in consideration for approximately 53.8 million common shares of Star Diamond Corp. and 1.1 million common share purchase warrants, with each warrant entitling Newmont Canada to acquire one additional common share at a price of $0.349 per share for a period of 45 months from the date of issuance. Prior to the completion of the Newmont Acquisition, Star Diamond Corp. held a 69 percent interest in the FalC JV and Newmont Canada had a 31 percent interest. As additional consideration for Newmont Canada's interest in the FalC JV, the Company has agreed to grant Newmont Canada a participation right to subscribe for and purchase such number of common shares in order to maintain its proportionate interest in the share capital of the Company; Newmont Canada may exercise this right each time Star Diamond Corp. undertakes financing (subject to certain exemptions) at the same price and terms as the financing.  The Company has also agreed that Newmont Canada will receive a contingent payment in the aggregate amount of $3.2 million if a positive decision is made to develop a mine on the Project.  Star Diamond Corp., in its sole discretion (subject to regulatory approvals), may satisfy the contingent payment due to Newmont Canada through a cash payment or the issuance of common shares priced at the VWAP at that time.

Following the Newmont Acquisition, Kensington transferred its interest in the FalC JV to Star Diamond Corp. and thereafter, the FalC-JV was terminated, resulting in Star Diamond Corp. holding 100% of the Fort à la Corne mineral dispositions (including the Star - Orion South Diamond Project).

Pursuant to the Option Agreement, the Company has granted to RTEC four options which in aggregate permit RTEC to earn a 60% interest in the Fort à la Corne mineral dispositions (including the Star - Orion South Diamond Project). Completion of the First Option does not entitle RTEC to an interest in the Project. At any time after RTEC has earned an interest in the Project, RTEC may elect to form a joint venture with Star Diamond Corp.. If after RTEC has earned an interest in the Project, RTEC allows an option to expire or terminates the Option Agreement, RTEC will be deemed to have elected to form a joint venture with Star Diamond Corp.. Under the Option Agreement, each party has granted the other a right of first refusal with respect to the sale of its interest.

North Aerial View of the Star-Orion South Diamond Project

North Aerial View of the Star-Orion South Diamond Project


1Cautionary note: The PEA was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). Readers are cautioned that the PEA is preliminary in nature and includes the use of Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the results of the PEA will be realized.

2.  Diamond-bearing kimberlite is produced from the mine and diamonds are recovered in the processing plant for 34 years. The overall project life is 38 years, which includes just over four years of pre-stripping activities.

3. During the fourth quarter of 2015, the Company announced Revised Mineral Resource estimates for the Star and Orion South Kimberlites (see Star Diamond Corp. News Release dated November 9, 2015 and Technical Report filed December 21, 2015). Accordingly, the mineral resources and economic assessment previously disclosed by Star Diamond Corp. for the Project should no longer be relied upon.