Star Diamond : 2025 Second Quarter Report

About this update from Star Diamond Corporation

Management's Discussion & Analysis June 30, 2025 The following discussion and analysis is prepared by Management as of August 12, 2025 and should be read in conjunction with the unaudited condensed interim consolidated financial statements for Star Diamond Corporation ("Star Diamond", or the "Company") for the three and six months ended June 30, 2025 (the "Interim Financial Statements"), as well as the audited consolidated financial statements of the Company for the years ended December 31, 2024 and 2023 (the "2024 Annual Financial Statements"), in each case available on SEDAR+ at https://www.sedarplus.ca . The Company prepared its financial statements for the period ended June 30, 2025 and 2024, in accordance with IAS 34 Interim Financial Reporting using accounting policies consistent with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"). All currency amounts are quoted in Canadian Dollars, unless otherwise stated. Corporate Information Star Diamond Corporation (the "Company") was incorporated under the Canada Business Corporations Act on April 29, 1985 and its shares are publicly traded on the Toronto Stock Exchange ("TSX"). The principal activities of the Company are the exploration and evaluation of diamond projects. The Company is located at 700 - 224 4 th Avenue South, Saskatoon, Saskatchewan, Canada. Star Diamond is a Canadian natural resource company focused on exploring and evaluating Saskatchewan's diamond resources. Star Diamond holds a 100% interest in the Fort à la Corne Project (FALC Project, which includes the Star - Orion South Diamond Project, or the "Project"). These properties are in central Saskatchewan, near established infrastructure, including paved highways and the electrical power grid, which provide significant advantages for future possible mine development. The Company also holds a 100% interest in the exploration and evaluation properties of the Buffalo Hills Diamond Project (the "BH Project") located approximately 400 kilometres northwest of Edmonton, Alberta, Canada. Corporate Developments Effective January 1, 2025, the Company has outsourced the Chief Financial Officer ("CFO") to Mr. Carmelo Marrelli, replacing Mr. Rick Johnson. In January 2025, the Company disposed of its remaining share position in Wescan Goldfields Inc. ("Wescan") for gross proceeds of $114. On February 18, 2025 and February 27, 2025, Star Diamond closed a non-brokered private placement (the "Offering") of convertible debentures (the "Debentures") to raise aggregate gross proceeds of $335 and $230, respectively, which resulted in total gross proceeds of $565. The Debentures bear simple interest at a rate of 8% per annum and are convertible into common shares of the Company in certain circumstances, including upon a qualified offering to raise aggregate gross proceeds in excess of $2,000. Pursuant to the closing of both tranches of the Offering, the Company issued an aggregate combined total of 28,250,000 share purchase warrants ("Warrants"), being one Warrant for each $0.02 principal amount of Debentures purchased. Each Warrant is exercisable to acquire one common share of the Company at an exercise price of $0.06 for a period of 2 years from the closing. In connection with the Offering, Mr. Mason, CEO of the Company, purchased Debentures in the aggregate principal amount of $25. Ms. Lisa Riley, director of the Company, has purchased Debentures in the aggregate principal amount of $20. On February 27, 2025, the Company announced the resignation of George Read as Senior Vice President Corporate Development effective February 28, 2025) and his appointment as a Senior Technical Advisor. On May 16, 2025, the Company announced that it reached an agreement with Spirit Resources s.a.r.l. ("Spirit") to provide funding to the Company by way of a private placement of units for gross proceeds of $4,000 (the "Private Placement", see "Proposed Transaction" for detail) and an interim $800 unsecured loan. The loan bears interest at 6% per annum and matures upon the earlier of the private placement and the date falling on the 180 th day after issuance of the loan, unless extended by Spirit in its sole discretion. Trends The Interim Financial Statements were prepared on the assumption that the Company will continue as a going concern and realize its assets and discharge its liabilities and commitments in the normal course of business. Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that cast significant doubt upon the Company's ability to continue as a going concern. At June 30, 2025, the Company had an excess of current liabilities over current assets of $1,692 including cash and cash equivalents of $452. In addition, the Company had negative cash flows from operations of $1,099, an accumulated deficit of $900,995, and currently does not generate revenue. During the period ended June 30, 2025, the Company closed a non-brokered private placement of convertible debentures of $565 and obtained an unsecured loan of $800. However, the ability of the Company to continue as a going concern and fund its expenses in an orderly manner will require additional forms of financings. See "Subsequent Events". There is no assurance that the Company will be successful in obtaining the required financing at an acceptable cost as and when needed or at all. Failure to obtain additional financing on a timely basis may cause the Company to postpone exploration and/or evaluation plans, forfeit rights in its properties or reduce or terminate its operations. In addition, external risks like a trade dispute with the U.S. could put significant strain on Canada's broader economy. Titfor-tat import tariffs are generally inflationary and would raise costs. Management, in conjunction with the Board, will continue to monitor these developments and their effect on the Company's business. Management regularly monitors economic conditions and estimates their impact on the Company's operations and incorporates these estimates in both short-term operating and longer-term strategic decisions. Inflation increases major operating expenses like service provider costs such as accounting, costs of being a reporting issuer, legal and audit costs. The Company works to counteract rising expenses. Despite the best efforts to control costs where possible, inflationary pressures nonetheless introduce added financial burdens on the Company. Apart from these and the risk factors noted under the heading "Risks and Uncertainties", management is not aware of any other trends, commitments, events or uncertainties that would have a material effect on the Company's business, financial condition of the Company or results of operations. See "Risks and Uncertainties" below. Fort à la Corne mineral properties The Company currently holds a 100% interest in certain Fort à la Corne ("FALC") kimberlites (see March 26, 2024, news release: Star Diamond Corporation completes acquisition of Rio Tinto's 75% interest in Fort à la Corne Joint Venture ) including the Star and Orion South Kimberlites. The FALC mineral properties are located in the Fort à la Corne Provincial Forest, 60 km east of Prince Albert, Saskatchewan (see Figure 1). Highway 55, located to the north of the Project, connects Prince Albert with several towns located directly north of FALC to the town of Nipawin, east of FALC. Highway 6 runs north south and is located to the east of FALC. Figure 1: Location Map of the Star-Orion South Diamond Project In May 2024 the Company announced that it completed an estimate of the diamond valuation of three major kimberlite units within the Orion North Kimberlite (see news release May 16 2024: Fort à la Corne Project Orion North diamond valuation and proportions of Type IIa diamonds). The diamond parcels included in this valuation are all from large diameter drill samples collected between 2006 and 2008 and are sampled from Early Jou Fou ("EJF") kimberlite units that form the dominant, potentially economic lithologic units of the K120 and K147/K148 kimberlites. These diamond parcels have not previously been examined for diamond valuation. The K120 and K147/K148 kimberlites are the principal components of the Orion North cluster of contiguous kimberlites. Highlights The diamond valuation exercise has shown that the diamonds found within the EJF units of the K120, and K147/148 kimberlites have high modelled diamond prices, between US$212 and US$288 per carat, as shown in the table below. The two highest value stones, from K147-K148-EJF4 and K120-EJF, respectively, are 6.89 carats (US$3,519.00 per carat, US$24,246.00) and 7.50 carats (US$3,520.00 per carat, US$26,400.00). These diamond parcels are too small (carats and stones) for rigorous diamond value estimates. The diamond typing exercise has shown the presence of high proportions of Type IIa diamonds in all three of these Orion North kimberlites. The EJF3 and EJF4 units of K147/K148 have anomalously high proportions of Type IIa diamonds of 41% and 63%, respectively, as shown in the table below. The diamonds analysed represent a spectrum of diamond sizes from +5 DTC (+0.05 carats) to 7 carats. A Target for Further Exploration ("TFFE") completed by Star Diamond in 2014 (see News Release March 06, 2014), estimated that between 511 million and 609 million tonnes of the major EJF units, containing between 25 and 50 million carats, occur within the Orion North kimberlite cluster. This work enables Star Diamond to state that the Orion North Kimberlite is a diamond deposit with more than 500 million tonnes of potential mineable kimberlite. Diamond Valuation Diamond valuations and model prices, as shown in the table below, were completed by Mr. Nelson Karun, Diamond Specialist, for Star Diamond. The Parcel Price represents an estimate of the wholesale price for which the parcel could currently be sold. The Model Price is an estimate for a future price that considers the diamond size frequency distribution. The Low Model represents a minimum while the High Model does not represent a maximum. Kimberlite Number of Stones Number of Carats Parcel Price (US$/Ct) Model Price (US$/ct) Low Model Price (US$/ct) High Model Price (US$/ct) K120-EJF 3,162 273.93 202.55 267.77 200.83 401.66 K147-K148 EJF3 666 70.90 139.14 287.88 215.91 431.82 K147-K148-EJF4 940 81.61 374.45 211.74 158.80 317.60 As observed by Mr. Karun, diamonds from these kimberlite bodies exhibit good quality and colour, consisting significant collection colour (GIA: D-F) and there are high proportions of Gem and Near Gem and low proportions of Boart (Industrial). These diamond parcels include high yielding models. The proportion of diamonds in each parcel that exhibits strong fluorescence is very low (negligible)- as listed in the table below. Kimberlite Gem % Near Gem % Boart % Strong Fluorescence % K120-EJF 61.43 22.71 15.86 3.04 K147-K148 EJF3 73.67 16.28 10.06 3.30 K147-K148-EJF4 71.87 19.09 9.04 1.28 Diamond Typing These three kimberlite units have diamond parcels with sufficient diamonds to conduct preliminary diamond typing studies. The number and the percentage of Type IIa diamonds for these Orion North EJF units studied are documented in the table below and show that these kimberlites have anomalously high proportions of Type IIA diamonds, particularly K147/K148-EJF4. Orion North Diamonds (+5 DTC (0.05 carats) to 7 carats) Number of Diamonds Typed Number of Type IIa Diamonds Percentage Type IIa Diamonds K120-EJF 1,545 167 10.81 K147-K148-EJF3 454 184 40.52 K147-K148-EJF4 514 326 63.42 Also, in May 2024 the Company announced a review of the work completed by Rio Tinto Exploration Canada Inc. ("RTEC") on the Fort à la Corne Project ("FALC Project") (see news release May 27, 2024). From June 2017 until June 2022, RTEC pursued extensive exploration and evaluation analysis on two fronts at the FALC Project: The successful completion and calibration of a trench cutter bulk sampling and 4icrodiamond recovery program on Star Kimberlite, with a view to expanding this program to the Orion South Kimberlite; and A separate team of RTEC geologists conducted the Orbit exploration program, with the aim of prioritizing the diamond prospectivity of all the other kimberlites that make up the FALC Project. RTEC also conducted detailed mining studies for the future development of diamond mines on the Star, Orion South and Orion North Kimberlites. Many of the conclusions of these mining studies confirm work previously completed by Star Diamond. Highlights of RTEC's studies suggest: The continuous and sequential mining of diamonds from Orion South, Star and Orion North over a period of seventy years; The ability to maintain stable pit slopes in the Fort à la Corne Kimberlites through the use of wall buttressing and dewatering; Analysis produced by RTEC estimates that, based on the currently available size frequency distribution ("SFD") for the EJF kimberlite within the Star Kimberlite, a 222,000 tonne sample of the EJF is likely to yield 101 Specials (+10.8 carats) and one Exceptional diamond (+100 carats); and RTEC confirmed that the TC EJF diamond parcel contained a significant proportion of Type Iia diamonds (29% Type Iia +9 DTC). Star Trench Cutter Bulk Sampling and Diamond Recovery RTEC contracted Bauer Maschinen GmbH ("Bauer") to adapt a Bauer BC 50 Cutter to sample kimberlite at depths of up to 250 meters below surface. The trench cutter ("TC") has a rectangular profile of 3.250 metres by 1.575 metres (3.200 by 1.525 metres drill tool plus 25 millimetres all round overbreak). The trenches were excavated using the custom Bauer BC 50 Cutter mounted on a Bauer MC 128 Duty-cycle Crane. Kimberlite excavated by the cutter bit was pumped to the surface in a slurry, and kimberlite fragments between +1.0 and 80.0mm were recovered from the slurry by the Kimberlite Separation Unit. These kimberlite fragments were collected in cubic metre bulk bags and kept in an on-site storage area by RTEC until such time that they could be processed through the newly constructed Consulmet Bulk Sampling Plant ("BSP"). The BSP included a modern diamond recovery flowsheet with a TOMRA XRT sorter to recover diamonds between 6.0 and 25.0mm and a narrow range Dense Media Separator ("DMS") to recover the small diamonds between 1.0 and 6.0mm. The BSP also included High Pressure Grinding Rolls ("HPGR") to ensure liberation of +1.0mm diamonds from the +6.0-25.0mm waste from the XRT sorter. RTEC successfully drilled ten TC holes in the Star Kimberlite and produced the total Early Joli Fou ("EJF") diamond parcel listed in the table below in comparison with EJF parcels produced from the previous Star Kimberlite Underground and Large Diameter Drill ("LDD") programs: Diamond Parcels for Star Kimberlite EJF: TC, LDD and Underground Star EJF Kimberlite Kimberlite Tonnes Carats (+1 DTC) Grade (cpht) Stones (+1 DTC) Stones per tonne (+1 DTC) Trench Cutter 8,964.71 1,428.89 15.94 24,900 2.78 LDD Inner 8,440.57 979.39 11.60 10,238 1.21 Underground 43,372.18 7,425.42 17.12 56,007 1.29 The TC EJF diamond parcel shows improved diamond grade over the LDD program and the TC grade is close to that for the Underground. The significant increase in stones per tonne for the TC diamond parcel is a function of the improved small diamond recovery by the modern flowsheet of the BSP. RTEC specifically designed this BSP for the effective liberation of small stones by the HPGR and their efficient recovery as a result of the narrow range (1.0-6.0mm) of the DMS. The small diamonds (+1DTC, +3DTC & +5DTC) of Star and Orion South are of a high quality and colour and, consequently, have significant value: US$30 to US$50 per carat and opposed to the usual US$5 to US$10 per carat. This efficient recovery of these small stones significantly improves the diamond SFD and will add to the overall diamond grade for Star and Orion South in the pending revised Mineral Resource estimate. The TC EJF diamond parcel included 12 high value stones ranging from 4.08 carats valued at US$5,100.00 to 16.96 carats valued at US$110,240.00. RTEC confirmed that the TC EJF diamond parcel contained a significant proportion of Type IIa diamonds (29% Type IIa +9 DTC) and nine of the twelve most valuable stones are Type IIa. The details of the high value TC diamonds and their Type IIa statistics were reported in News release May 31, 2022. RTEC have documented that only Karowe Diamond Mine in Botswana and Letseng Diamond Mine in Lesotho have similar coarse diamond SFD's and proportions of Type IIa diamonds as that of the Star and Orion South Kimberlites. The majority of +100 carat Exceptional diamonds mined globally are Type IIa and only two mines, namely Karowe and Letseng, produce +100 carat Exceptional diamonds on a monthly basis. Two other diamond mines, Cullinan in South Africa and Mothae in Lesotho, produce +100 carats Exceptional diamonds on an annual basis. This poorly understood sub-population of Type IIa diamonds represents only 2 percent of global production, yet dominates the largest, highest value diamonds in the world. These diamonds have a unique niche in the luxury goods market, which is usually not impacted by global uncertainty and certainly not by synthetics. Specials, greater than 10.8 carats, and Exceptionals, with values in excess of US$10 million fill this attractive niche, and the Star and Orion South Kimberlites, like Karowe and Letseng, can provide these unique stones. Careful analysis produced by RTEC estimates that, based on the currently available SFD for the EJF kimberlite within the Star Kimberlite, a 222,000-tonne sample of the EJF is likely to yield 101 Specials (+10.8 carats) and one Exceptional diamond (+100 carats). Remembering that the PEA anticipates an ore processing rate of 45,000 tonnes of kimberlite per day and, consequently, Specials should be recovered on a daily basis and Exceptional diamonds on a weekly basis. Orbit Exploration Program FALC Project The results of the Orbit exploration program highlighted the kimberlites of Orion North (K120, K147, K148) as having significant potential to add to the future Mineral Resources of the FALC Project. See recent Orion North diamond valuation and Type IIa proportion (see news release May 16, 2024). Orion Centre (K145), Taurus (K150, K118, K122) and K119 stand out in the field as having a number of the attributes sought but require further work to completely evaluate. The methodology and conclusions of this work have already been published (see news release April 13, 2022). Mining Studies Completed by RTEC RTEC developed a conceptual 74-year schedule for the sequential mining of Orion South, Star and Orion North, assuming that the run-of-mine ore capacity was limited to 14 million tonnes per annum, and they anticipated 70 continuous years of kimberlite ore processing and diamond production. Star Diamond believes this work is not necessarily compliant with NI 43-101. Mining studies provided to Star Diamond by RTEC demonstrated the ability to maintain stable pit slopes in the Fort à la Corne Kimberlites. In addition, it was determined that the use of a mixed mining fleet improves efficiency and brings forward time to first ore, specifically: the use of Bucket Wheel Excavators ("BWE") in the overburden along with in-pit crush and convey systems ("IPCC") for delivery of ore to the processing plant, combined with conventional truck and shovel in the ore zones. The use of BWE's and IPCC has the potential to lower the operating costs, along with a small mixed trucking fleet for buttressing which also allows for operational flexibility. Correct scheduling allows longwall mining benches to be exploited within the confines of a circular pit. BWE or IPCC (or combination) for overburden stripping and mining methods are electrically powered and coupled with the accessible provincial grid power, present a greener mining opportunity. Ultra-class battery electric haul trucks are in development and can be integrated with BWE and IPCC. RTEC mining studies confirmed that pit walls in the Lower Colorado Shale need to be minimized by leaving some kimberlite in the pit wall, as this has a positive effect on stabilizing the pit slope. Buttressing is considered to be a viable method of pit slope stabilization particularly within weak units in the pit walls, such as the Lower Colorado Shale and paleo-channel units contained within some overburden areas. Dewatering the Mannville Group sediments is critical and has been proven as feasible and resolves stability in the base of the pits. Depressurization of the Colorado Shale is key to achieving an acceptable Factor of Safety ("FoS"). Based on conceptual studies a FoS can be demonstrated at 1.3 for a pit with a pore pressure decrease of 50% above and beyond unloading release. Once excavation begins and wall stability can be assessed at a bench scale, performance-based design or observational mining has potential to further increase slope design angles. Observational mining and performance-based design have been proven to successfully increase slope angles against design in the Canadian oil sands. Revised Mineral Resources Estimate In July 2024 the Company announced a significant increase in the estimated Mineral Resources for the Star - Orion South Diamond Project (the "Project"). The Company commissioned A.C.A Howe International Ltd. ("Howe") and Ravenscroft Mining Advisors ("Ravenscroft") to prepare an independent National Instrument 43-101 Technical Report with respect to the Project located in Saskatchewan, Canada, entitled "TECHNICAL REPORT AND REVISED RESOURCE ESTIMATE for the STAR - ORION SOUTH DIAMOND PROJECT FORT A LA CORNE AREA SASKATCHEWAN, CANADA LATITUDE 53º 15" N LONGITUDE 104º 48" W for STAR DIAMOND CORPORATION" and dated effective July 24, 2024 (the "Technical Report"). In addition, Mr. Nelson Karun, Diamond Specialist for Star Diamond has provided the diamond pricing estimates utilized in the Revised Mineral Resource Estimate effective as of July 24th, 2024, for the Project as set forth in the Technical Report. Highlights include: Indicated Mineral Resources on Star have increased 22 percent to 34.8 million carats and the grade has increased 20 percent to 19.4 cpht Indicated Mineral Resources on Orion South have increased 37 percent to 36.9 million carats and the grade has increased 32 percent to 17.9 cpht Star Diamond has determined that no additional bulk sampling is required on the Orion South Kimberlite for the rigorous estimation of these Mineral Resources, and this results in the savings of millions of dollars in exploration expenditures and shaves significant time off the completion of the Pre-Feasibility Study ("PFS"). Revised Mineral Resources Estimates for the Star and Orion South Kimberlites Star Kimberlite Revised Mineral Resources Estimate Resource Category Kimberlite Unit Tonnes x1,000 Grade cpht Carats x1,000 Indicated MJF 21,822 6.6 1,437 Indicated EJF Outer 47,659 16.9 8,045 Indicated EJF Inner 84,090 24.0 20,168 Indicated Pense 13,960 18.1 2,525 Indicated Cantuar 12,060 21.7 2,622 Indicated TOTAL 179,591 19.4 34,797 Inferred EJF Outer 34,100 14.4 4,923 Inferred Pense 9,982 17.6 1,761 Inferred Cantuar 5,488 21.0 1,154 Inferred TOTAL 49,570 15.8 7,838 Orion South Kimberlite Revised Mineral Resources Estimate Resource Category Kimberlite Unit Tonnes x1,000 Grade cpht Carats x1,000 Indicated EJF Outer 46,673 16.3 7,593 Indicated EJF Inner 94,177 25.7 24,219 Indicated Pense 65,746 7.8 5,125 Indicated TOTAL 206,596 17.9 36,937 Inferred EJF Outer 41,236 15.5 6,400 Inferred Pense 2,591 7.5 194 Inferred P3 6,093 12.2 742 Inferred TOTAL 49,921 14.7 7,336 Table Notes Apply to Table Canadian Institute of Mining and Metallurgy ("CIM") definitions were followed for classification of mineral resources. Star Kimberlite Units: Cantuar, Pense, Early Joli Fou ("EJF"), & Mid Joli Fou ("MJF"). Orion South Kimberlite Units: P3, Pense & Early Joli Fou (EJF). Mineral Resources are constrained within a Whittle optimized pit shell. Mineral Resources, which are not Mineral Reserves do not have demonstrated economic viability. The estimation of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues. There is no guarantee that all or any part of the Mineral Resources will be converted into a Mineral Reserves. Grade values are rounded to the first decimal. The effective date of the Revised Mineral Resources estimate is July 24, 2024. The EJF Inner and Outer kimberlite units for both deposits are based on detailed kimberlite geology recorded from the core logging of the pattern drilling program. The EJF Inner represents coarser grained EJF kimberlite that occurs within the volcanic crater and the EJF Outer includes finer grained EJF kimberlite that lies on and outside the crater rim. This Revised Mineral Resources estimate acknowledges that the transition from Inner to Outer is geologically gradational. Mineral Resources Estimation Methodology Revised grade estimates at Star and Orion South have been based on a diamond industry standard approach using alignment of sample diamond size frequency distributions. Peter Ravenscroft explains: "This approach has allowed for the development of unbiased grade estimates that take into account the effects of using necessarily small samples in a diamond deposit with relatively low grade but coarse stone size. At Orion South, it has also provided a means of resolving sampling results from several sampling campaigns with different drilling methodologies and different sample plant flowsheets. Final alignment with underground bulk sample results and block model interpolation with appropriate smoothing has resulted in robust estimates of grade at a required level of detail for feasibility study of the Star and Orion South deposits. Economic Assumptions CIM standards and Securities Commission disclosure regulations require that a Mineral Resource can only be declared on a mineral deposit which has "reasonable prospects for eventual economic extraction". The reported Mineral Resource for Star and Orion South are constrained using a Whittle pit optimization. The Mineral Resources reported in Table 1 comprise the kimberlite that is constrained within the optimized Whittle pit shell. Diamond values for this resource statement are based on the June 2024 High modeled prices determined by in-house Diamond Specialist, Nelson Karun. This Revised Mineral Resources estimate includes only stones recovered larger than +1 DTC diamond sieve and considers all kimberlite above 90 metres above mean sea level or to a depth of 360 metres below surface in Star and 375 metres below surface in Orion South, with the surface being defined by the Digital Terrain Model. Decision on Orion South Bulk Sampling Star Diamond, working in close consultation with Peter Ravenscroft of Ravenscroft Mining Advisors, has determined that only limited improvements in precision could be achieved by additional, prohibitively costly bulk sample programs, and that the extensive work already completed will allow for robust diamond price estimates on both Star and Orion South, with associated confidence limits allowing for quantified risk analysis as part of the PFS. This conclusion has been reached based on the following: Comprehensive sorting and valuation of all stones recovered from LDD and Underground sampling campaigns over the last 20 years, allowing for the combination of sample diamonds into significantly larger parcels. Detailed comparison of quality distributions between Orion South and Star, identifying some clear differences as well as some strong similarities, as would be expected from closely located kimberlites in the same cluster. Analysis of the relative precision of price estimates from samples of a different size, specifically where prices are influenced by large and high value stones as at Star and Orion South. In September 2024 the Company announced that the Technical Report documenting the Revised Mineral Resources Estimate (see News Release dated July 24, 2024) for the Star - Orion South Diamond Project (the "Project") has been filed on SEDAR+ ( https://www.sedarplus.ca ). Recent activities relating to the Star - Orion South Diamond Project and Fort à la Corne mineral properties The Revised Mineral Resources estimate will now be incorporated into a re-optimized open pit mine plan for the Project, which will include a re-evaluation of Mineral Reserves and an economic assessment based thereon. It is anticipated that this work will be completed during 2025-26 and will result in an updated Pre-feasibility Study including a revised statement of Mineral Reserves for the Project, if warranted, and an economic assessment based thereon. Buffalo Hills Diamond Project The Company holds a 100% interest in the exploration and evaluation properties and assets of the Buffalo Hills (BH) Project. Located approximately 400 kilometres northwest of Edmonton, Alberta, Canada, the BH Project includes 21 mineral leases covering 4,800 hectares and is a significant and accessible field of diamond-bearing kimberlites, with similarities to the Company's Fort á la Corne kimberlites. The BH Project is located in the Buffalo Hills Kimberlite District, which contains at least 38 individual kimberlite bodies, of which 26 kimberlites are diamond-bearing and a number of which outcrop at surface (see Figure 2). Exploration on these kimberlites started in 1996, and small parcels of diamonds have been collected from various exploration programs on many of those considered most prospective. Figure 2: Location Map of the Buffalo Hills Diamond Project Outlook Fort à la Corne Project Star Diamond's technical team will focus on the technical investigation and evaluation of the Star - Orion South Diamond Project, with the goal of a future development decision. The initial work was completed in 2024 with a revised Mineral Resource estimate for the Star - Orion South Diamond Project, which will form the foundation of an updated Prefeasibility Study ("PFS"). The PFS will enable a Feasibility Study, on which a production decision can be based. Highlights The revised Mineral Resource estimate for the Star and Orion South kimberlites has integrated Star trench cutter diamond data, adding improvement to the diamond size frequency curves for both kimberlites. The mitigation of risk in the Orion South diamond price estimate: the 2018 Preliminary Economic Assessment ("PEA") demonstrated that it is economically efficient to mine the Orion South kimberlite first. However, Orion South has a significantly smaller evaluation diamond parcel than Star, adding some risk to the diamond price estimate for Orion South. We believe there is an opportunity to mitigate the risk in the Orion South diamond price estimate, without the necessity of additional bulk sampling to obtain a larger diamond evaluation parcel. The scoping of an updated PFS was completed in 2024. A budget has been prepared for the completion of the PFS of $3.0 million. These developments will likely give rise to the ability to complete the updated PFS within a two-year time frame once financing has been obtained and the Feasibility Study shortly thereafter. We anticipate these major studies will be completed at a substantially lower expenditure level than was previously contemplated. Orion South Diamond Price Orion South has shallower overburden (Orion South 100 metres, Star 140 metres) and higher diamond grade (Orion South 17 cpht, Star 10 cpht) kimberlite in direct contact with overburden, both of which ensure more rapid access to cash flow after overburden removal in a future mine. Consequently, the PEA demonstrated that it is economically efficient to mine Orion South first. However, there is a significant difference in the size of the evaluation diamond parcels recovered from the EJF, the principal economic unit in both Star and Orion South. The Orion South evaluation parcel includes only 1,399 carats, as opposed to the Star EJF parcel of 7,122 carats. In order to commence mining on Orion South, the risk associated with the estimation of diamond price on a smaller evaluation parcel needs to be mitigated. We believe that the close similarities of the kimberlite geology and diamond parcel characteristics for Star and Orion South can enable better estimation of the Orion South diamond price. We have developed a plan to conduct an in-depth investigation of the extent of similarities between the Star and Orion South EJF diamond populations, with the aim of mitigating the risk in the estimation of the diamond price for the Orion South EJF diamond parcel. The goal of this investigation is to accurately estimate the Orion South diamond price without the requirement of additional bulk sampling, which is both expensive and time consuming. The confidence generated in the Orion South diamond price will add to the precision of the newly revised mineral resource estimate. Updated PFS The scoping of an updated PFS commenced in 2024 with the initial work to be focused on updating the hydrogeology and geotechnical models, in addition to the management of fines in plant process water. Changes in environmental legislation, since the PEA, require that deep groundwater pumped from the Mannville sediments to stabilize the open pits of a future mine will require a revised method of disposal. Geotechnical work will focus on the engineering of pit slopes, particularly in parts of the overburden, to ensure steeper pit slopes and, consequently, a significant reduction in overburden removal. The processing of some Orion South kimberlite results in plant process water from which the fines do not settle quickly or easily. Investigations will be made into the mechanical separation of the fines and the future of a fines management area, as this will minimize the use of "tailings ponds". Significant parts of the work completed for the 2018 PEA, including the mining method, process plant design, site layout and infrastructure, can be updated and incorporated into the updated PFS. Buffalo Hills Diamond Project Management continues to review the recent results from the diamond valuation and typing analysis with a view to possible work programs and a potential path forward for the asset. A more detailed update on activities at Buffalo Hills will be provided as it becomes available. Financial Highlights Selected financial information of the Company for the three and six months ended June 30, 2025 and 2024 is summarized as follows: Three months ended Three months ended Six months ended Six months Ended June 30, 2025 $ June 30, 2024 $ June 30, 2025 $ June 30, 2024 $ Net loss (1,450) (1,630) (2,416) (2,516) Net loss per share (1) (0.00) (0.00) (0.00) (0.00) Current assets 528 1,882 528 1,882 Total assets 14,115 16,326 14,115 16,326 Current liabilities 2,220 912 2,220 912 Total non-current liabilities 8,473 7,704 8,473 7,704 Working capital (deficit) (1,692) 970 (1,692) 970 (1) Basic and diluted. Results of Operations For the three months ended June 30, 2025, the Company recorded a net loss of $1,450 or $0.00 per share (2024 - net loss of $1,630 or $0.00 per share). The decrease in net loss was primarily due to the following: Exploration and evaluation expenditures decreased to $463 in 2025 (2024 - $913). Exploration and evaluation expenditures incurred during 2025 were primarily due to security and maintenance, continued diamond analyses, and test work for the FALC Project. Corporate development decreased to $19 in 2025 (2024 - $136) due to reduced marketing and publications issued in 2025. Change in derivative liability increased to a loss of $218 in 2025 (2024 - $nil) due to the changes in the fair values of the embedded derivatives of the convertible debentures. For the six months ended June 30, 2025, the Company recorded a net loss of $2,416 or $0.00 per share (2024 - net loss of $2,516 or $0.00 per share). The decrease in net loss was primarily due to the following: Exploration and evaluation expenditures decreased to $930 in 2025 (2024 - $1,202). Exploration and evaluation expenditures incurred during 2025 were primarily due to security and maintenance, continued diamond analyses, and test work for the FALC Project. Corporate development decreased to $32 in 2025 (2024 - $274) due to reduced marketing and publications issued in 2025. Loss on investment in Wescan Goldfields Inc. decreased to $nil in 2025 (2024 - loss of $58). Unwinding of discount of environmental rehabilitation provision increased to $132 in 2025 (2024 - $65). Change in derivative liability increased to a loss of $218 in 2025 (2024 - $nil) due to the changes in the fair values of the embedded derivatives of the convertible debentures. Su mmary of Quarterly Result 2025 2024 2023 Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3 Total assets ($ millions) 14.1 14.3 14.4 16.2 16.3 19.5 1.2 1.3 Total liabilities ($ millions) 10.7 9.8 9.2 8.7 8.6 10.2 1.0 0.7 Expense ($ millions) 1.1 0.9 1.1 1.3 1.5 0.9 1.0 0.6 Net loss ($ millions) 1.5 1.0 2.0 1.4 1.6 0.9 1.0 0.6 Net loss per share (1) ($) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Shares outstanding (millions) 623.3 617.8 617.6 611.5 599.9 494.8 482.7 476.4 (1) Basic and diluted. Related Party Transactions Key management personnel are persons responsible for planning, directing, and controlling the activities of an entity, and include executive and non-executive directors. Compensation for key management personnel and directors, including payments made or payable to related parties owned by executive officers and directors, is as follows: Three months ended Three months ended Six months ended Six months ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 $ $ $ $ Director fees 30 25 55 50 Salaries for key management personnel 59 97 119 193 Consulting and management fees to related companies 88 99 192 206 Share-based payments 132 48 144 97 Total compensation paid to key management personnel 309 269 510 546 The amounts disclosed in the table above are the amounts recognized as an expense during the reporting period related to key management personnel. The above transactions were in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The fair value of share-based payments in the form of stock options was determined using the Black-Scholes option pricing model. The fair value of share-based payments in the form of RSUs and DSUs was determined based on the five-day volume weighted-average trading price of the Company's shares preceding the date of grant. The compensation paid to key management personnel is included in the Company's statements of loss and comprehensive loss as follows: Three months ended Three months ended Six months ended Six months ended June 30, 2025 $ June 30, 2024 $ June 30, 2025 $ June 30, 2024 $ Administration 237 166 355 340 Exploration and evaluation 72 103 155 206 Total compensation paid to key management personnel 309 269 510 546 Liquidity The Company does not currently operate any producing properties and, as such, is dependent upon the issuance of new equity to finance its ongoing obligations and advance its exploration and evaluation properties. Until the Company's surplus cash is required to fund exploration, evaluation and/or development activities it is invested in a variety of highly rated instruments. On June 30, 2025, the Company had $452 (December 31, 2024 - $164) in cash and cash equivalents and a working capital deficit (excess of current liabilities over current assets) of $1,692 (2024 - working capital deficit of $1,017). The increase in working capital deficit was a result of the unsecured loan payable to Spirit and net cash used in operating activities, offset by proceeds received from convertible debentures and sale of shares in Wescan Goldfields Inc. In 2025, the Company initiated the following cost reductions: We have moved our head office to a smaller area in the same building resulting in a 70% drop in our office lease payments; Certain management/employee functions will be reduced or eliminated; and Site costs have been significantly reduced as operations moved to a care and maintenance basis. A budget has been prepared for the completion of the PFS of $3,000 which is subject to the completion of a financing. However, the ability of the Company to continue as a going concern and fund its expenses in an orderly manner will require additional forms of financing. There can be no assurance that the Company will succeed in obtaining additional financing, now or in the future. Failure to raise additional financing on a timely basis could cause the Company to suspend its operations and planned activities. Financial Instruments Certain financial instruments are exposed to the following financial risks: Credit risk Credit risk is the risk of an unexpected loss by the Company if a customer or third-party to a financial instrument fails to meet its contractual obligations. The Company considers this risk to be insignificant as the majority of the Company's cash and cash equivalents are held by financial institutions with an AA credit rating. At June 30, 2025, the Company's credit risk relates to its cash and cash equivalents of $452 (December 31, 2024 - $164). Liquidity risk Liquidity risk is the risk that the Company will not be able to meet regulatory liquidity and spending requirements as well as meet its financial obligations. The Company's approach to managing liquidity risk is to forecast future cash flows to ensure that it will have sufficient liquidity to meet its obligations when it is due. To ensure the Company has sufficient cash on hand, the Company prepares annual capital and operating budgets which are regularly monitored and updated as considered necessary. At June 30, 2025, the Company had a working capital deficit of $1,692 including cash and cash equivalents of $452. In addition to regulatory spending requirements at June 30, 2025, the Company has trade payables and other lease payments as set out in the following table on an undiscounted basis: Trade payables and accrued liabilities $ 1,142 Lease payments 115 Environmental rehabilitation provision 189 Total $ 1,446 The Company may pursue options to finance further exploration, evaluation and/or development as it currently does not have sufficient funds to bring any of its property interests into production from its own financial resources. Financing options may include equity financing, debt financing or other means. Although the Company has been successful in the past in obtaining financing, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain additional financing could result in a delay or indefinite postponement of further exploration, evaluation and/or development of its projects with the possible loss of such properties. The Company is aware, in making its going concern assessment, of material uncertainties related to events and conditions that cast significant doubt upon the Company's ability to continue as a going concern. On June 30, 2025, the Company has a working capital deficit of $1,692 including cash and cash equivalents of $452. The ability of the Company to continue as a going concern and fund general and administrative expenses in an orderly manner will require further sources of financing by the end of 2025. There is no assurance that the Company will be successful in obtaining required financing at an acceptable cost as and when needed or at all. Failure to obtain additional financing on a timely basis may cause the Company to postpone exploration and/or evaluation plans, forfeit rights in its properties or reduce or terminate its operations. The Company is assessing opportunities to address the issue of liquidity. Market risk Market risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of four types of risk: foreign currency risk, interest rate risk, and commodity price risk. Foreign currency risk: Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and US dollar or other foreign currencies will affect the Company's operations and financial results. The Company does not have significant exposure to foreign exchange rate fluctuation since transactions and balances in foreign currencies are minimal, if any. Commodity price risk: Commodity price risk is the risk that a variation in commodity price will affect the Company's operations and financial results. The Company does not have significant exposure to commodity price fluctuations since it is currently in the exploration stage. Interest rate risk: The interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company does not have any borrowings. Interest rate risk is limited to potential decreases on the interest rate offered on cash and cash equivalents held with chartered Canadian financial institutions. The Company considers this risk to be immaterial. Proposed Transaction On May 16, 2025, the Company announced that it reached an agreement with Spirit to provide funding to the Company by way of a private placement (the "Private Placement") of units for gross proceeds of $4,000 and an interim $800 unsecured loan. Under the Private Placement, Spirit has agreed to subscribe for 133,333,333 units at a price of $0.03 per unit for aggregate proceeds of $4,000. Each unit will consist of one common share of the Company and one common share purchase warrant with an exercise price of: (i) $0.04 per share at any time within 12 months following the date of issue, and (ii) $0.05 per share thereafter, with such warrants being exercisable for a period of 24 months, provided that if the Company fails to complete one or more equity financings for at least $3,000 in aggregate within such 24-month period, then the exercise period of the warrants will be extended by a further 12 months. Upon completion of the Private Placement, Spirit would hold 194,455,143 common shares, representing 25.82% of the issued and outstanding common shares. Consequently, the completion of the Private Placement may "materially affect control" of the Company within the meaning of the TSX Company Manual, and may result in Spirit becoming an "Acquiring Person" under the Company's Amended and Restated Shareholder Rights plan dated May 30, 2023 (the "Shareholder Rights Plan"). The completion of the Private Placement is conditional upon receipt of the approval of the Company's shareholders (other than Spirit), including with respect to: (i) the waiver of the application of the Shareholder Rights Plan to the Private Placement and the termination of the Shareholder Rights Plan; (ii) the issuance of common shares and warrants on the terms of the Private Placement; (iii) Spirit obtaining the ability to materially affect control of the Company; (iv) the appointment by Spirit of two individuals to the board of directors of the Company; and (v) any such other matters as may be agreed by the Company and Spirit. The Private Placement was approved at the special meeting of holders of common shares of the Company on July 29, 2025. Subsequent Events On August 6, 2025, the Company announced the closing of the Private Placement to Spirit for gross proceeds of $4,000. Contemporaneously with the completion of the Private Placement, Al Gourley and Wayne Malouf were elected by the shareholders as directors of the Company. The Company issued an aggregate of 11,732,919 units (the "Conversion Units") in connection with the automatic conversion of the outstanding principal amount plus accrued interest due under the Company's convertible promissory notes. Each Conversion Unit comprises of one common share and one warrant exercisable for one common share. Each warrant is exercisable for a period of 24 months; provided that if the Company fails to complete one or more equity financings for at least $3,000 in aggregate within such 24-month period, then the exercise period of the warrants will be extended by a further 12 months. The warrants have an exercise price of $0.05. Critical Accounting Estimates and Judgments The Interim Financial Statements have been prepared in accordance with IFRS issued by the IASB. The Company's material accounting policies are described in note 4 to the 2024 Annual Financial Statements. Certain of these policies involve critical accounting estimates as they require management to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions. The uncertainties related to these areas could significantly impact the Company's results of operations, financial condition and cash flows. In particular, the significant areas of judgment and estimation uncertainty considered by management in preparing the consolidated financial statements are: identification of cash generating units, exploration and evaluation expenditures, reserve and resource estimation, asset valuations and exploration and evaluation assets impairment, environmental rehabilitation provision and share-based payment transactions. These are discussed in more detail in note 4 to the Interim Financial Statements. Disclosure Controls and Procedures In accordance with the requirements of National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings , the Company's management, under the supervision and with the participation of the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), are responsible for establishing and maintaining disclosure controls and procedures. Subject to the following limitations, the Company designs disclosure controls and procedures to provide reasonable assurance that any information required to be disclosed by the Company under securities legislation is recorded, processed, summarized and reported within the applicable time periods, and to ensure that required information is gathered and communicated to the Company's management so that decisions can be made about timely disclosure of that information. The Company recognizes that the relative cost of maintaining these disclosure controls and procedures should not exceed their expected benefit. As at the end of the period covered by this MD&A and accompanying consolidated financial statements, the CEO and the CFO have reviewed and evaluated the design and effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the CEO and the CFO have concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025 due to the existence of material weaknesses in internal controls over financial reporting noted in the following section. The Company mitigates these weaknesses by using external consultants as appropriate; however, such mitigating procedures do not constitute compensating controls for the purposes of NI 52-109. Internal Controls over Financial Reporting Procedures The Company's management is responsible for establishing and maintaining adequate internal controls over financial reporting. Subject to the following limitations, in accordance with the requirements of NI 52-109, the Company's management, under the supervision and with the participation of the CEO and the CFO and effected by the Company's board of directors, have designed the Company's internal controls over financial reporting as of June 30, 2025. Any system of internal controls over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management, including the CEO and the CFO, assessed the effectiveness of the Company's internal controls over financial reporting as of June 30, 2025. In making its assessment, management, including the CEO and the CFO, used the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Given changes in the operations of the Company and its management over the past year, it was determined that the Company does not have adequate in-house personnel to properly implement segregation of duties with respect to day-to-day accounting or to prevent and monitor the potential for management override. Further the Company does not have the in-house expertise to deal with complex accounting or non-routine transactions. It is not deemed economically feasible at this time to have such personnel. These material weaknesses may increase the risk of material misstatements in the financial statements. The Company mitigates these weaknesses by using external consultants as appropriate, however, such mitigating procedures do not constitute compensating controls for the purposes of NI 52-109. Risks and Uncertainties The securities of the Company are highly speculative due to the nature of the Company's business as well as the present stage of exploration and development of its mineral properties. The material risk factors and uncertainties, which should be considered in assessing the Company's activities, are described under the heading "Risks and Uncertainties" in the Company's most recent Annual Information Form which is available on SEDAR+ at https://www.sedarplus.ca . The reader is cautioned that the description of risks and uncertainties is not all inclusive as it pertains to conditions currently known to Management. There can be no guarantee or assurance that other factors will or will not adversely affect the Company. Technical Information All technical information in this MD&A has been prepared under the supervision of Mark Shimell, VP Exploration, Professional Geoscientist in the Province of Saskatchewan, who is the Company's "Qualified Person" under NI 43-101. Caution regarding Forward-looking Statements This MD&A contains forward-looking statements as defined by certain securities laws, including the "safe harbor" provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "intend", "forecast", "target", "project", "guidance", "may", "will", "should", "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook. In particular, statements regarding the Company's future operations, future exploration and development activities or other development plans constitute forward-looking statements. By their nature, statements referring to mineral reserves, mineral resources or the PEA constitute forward-looking statements. Forward-looking statements contained or implied in this MD&A include, but are not limited to, statements relating to the Company's ability to continue as a going concern; statements regarding programs previously performed by Rio Tinto Canada; statements regarding future work programs by the Company;; statements related to mineral resources and/or reserves; statements related to the approval of the development of the Star - Orion South Diamond Project and the Orion South diamond price; statements relating to future development of the Star - Orion South Diamond Project and associated timelines; statements with respect to environmental permitting and approvals; the Company's need for and intention to seek additional financing; statements with respect to metallurgical and diamond investigations, diamond valuations, the potential proportion of Type IIa diamonds in the Orion North kimberlites and the potential for the recovery of large, high-quality diamonds. All forward-looking statements are based on the Company's current beliefs as well as assumptions made by and information currently available to it and involve inherent risks and uncertainties, both general and specific. Risks exist that forward-looking statements will not be achieved due to a number of factors including, but not limited to, developments in world diamond markets, changes in diamond valuations, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar, changes in exploration, development or mining plans due to exploration results and changing budget priorities of the Company, the effects of competition in the markets in which the Company operates, risks related to diamond breakage from extraction and diamond recovery, risks related to the Company's need for additional financing and the Company's ability to raise that financing, the impact of changes in the laws and regulations regulating mining exploration and development, judicial or regulatory judgments and legal proceedings, operational and infrastructure risks and the additional risks described in the Company's most recently filed Annual Information Form, annual and interim MD&A, news releases and technical reports. The Company's anticipation of and success in managing the foregoing risks could cause actual results to differ materially from what is anticipated in such forward-looking statements. Although the Company considers the assumptions contained in forward-looking statements to be reasonable based on information currently available to it, those assumptions may prove to be incorrect. When making decisions with respect to the Company, investors and others should not place undue reliance on these statements and should carefully consider the foregoing factors and other uncertainties and potential events. Unless required by applicable securities laws, the Company does not undertake to update any forward-looking statement that is made herein. Additional Information Additional information related to the Company, including the latest available Annual Information Form, is available on SEDAR+ at https://www.sedarplus.ca . STAR DIAMOND CORPORATION CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 2025 (EXPRESSED IN CANADIAN DOLLARS) (UNAUDITED) Notice to reader The accompanying unaudited condensed interim consolidated financial statements of Star Diamond Corporation (the "Company") have been prepared by and are the responsibility of the Company's management. The unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors. Condensed Interim Consolidated Statements of Financial Position (Expressed in thousands of Canadian Dollars) Unaudited As at June 30, 2025 As at December 31, 2024 ASSETS Current assets Cash and cash equivalents $ 452 $ 164 Receivable (note 7) 31 26 Prepaid 45 30 Total current assets 528 220 Investment in Wescan Goldfields Inc. (note 8) - 114 Property, plant and equipment (note 9) 3,183 3,649 Exploration and evaluation assets (note 10) 10,404 10,404 Total assets $ 14,115 $ 14,387 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Accounts payable and accrued liabilities (note 11) $ 1,142 $ 969 Loan payable (note 12) 780 - Current portion of lease liability (note 13) 109 79 Current portion of environmental rehabilitation provision (note 14) 189 189 Total current liabilities 2,220 1,237 Lease liability (note 13) - 43 Environmental rehabilitation provision (note 14) 8,033 7,901 Convertible debentures and derivative liability (note 15) 440 - Total liabilities 10,693 9,181 Shareholder's equity Share capital (note 17) 866,248 866,002 Warrant reserve (note 17) 2,441 2,215 Broker warrants (note 17) 64 64 Contributed surplus (note 18) 35,664 35,504 Deficit (900,995) (898,579) Total shareholder's equity 3,422 5,206 Total shareholder's equity and liabilities $ 14,115 $ 14,387 The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements. Going concern (note 3) Subsequent events (note 23) Approved by the Board of Directors on August 12, 2025 "Lisa Riley" Audit Chair "Larry Phillips" Director Three Months Ended Three Months Ended Six Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2025 2024 2025 2024 Income Interest and other income $ - $ 18 $ - $ 24 Expenses Administration 503 424 804 813 Consulting and professional fees (note 19) 145 69 244 119 Corporate development 19 136 32 274 Exploration and evaluation (note 16) 463 913 930 1,202 1,130 1,542 2,010 2,408 Loss before the under noted items (1,130) (1,524) (2,010) (2,384) Investment in Wescan Goldfields Inc. (note 8) - (37) (58) Unwinding of discount of loan payable (note 12) (9) - (9) - Unwinding of discount of lease liability (note 13) (3) (4) (7) (9) rehabilitation provision (note 14) (66) (65) (132) (65) Unwinding of discount of convertible debentures (note 15) (25) - (36) - Interest expense (notes 12 and 15) (16) - (21) - Gain on debt conversion (note 15) 15 - 15 - Change in derivative liability (note 15) (218) - (218) - Gain on sale of equipment 2 - 2 - Net loss and comprehensive loss for the period $ (1,450) $ (1,630) $ (2,416) $ (2,516) Net loss and comprehensive loss per share - basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00) Weighted average number of common shares outstanding - basic and diluted (000's) 620,947 599,909 619,359 547,369 Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Expressed in thousands of Canadian Dollars, except for share data) Unaudited Unwinding of discount of environmental The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements. Condensed Interim Consolidated Statements of Cash Flows (Expressed in thousands of Canadian Dollars) Unaudited Six Months Six Months Ended Ended June 30, June 30, 2025 2024 Operating activities Net loss for the period $ (2,416) $ (2,516) Adjustments for: Depreciation on property, plant and equipment 503 292 Fair value of share-based payments expensed 253 131 Investment in Wescan Goldfields Inc. - 58 Unwinding of discount of loan payable 9 - Unwinding of discount of lease liability 7 9 Unwinding of discount of environmental rehabilitation provision 132 65 Unwinding of discount of convertible debentures 36 - Interest expense 21 - Change in derivative liability 218 - Gain on debt conversion (15) - Changes in non-cash working capital items: Receivable (5) (25) Prepaids (15) (291) Accounts payable and accrued liabilities 173 (47) Net cash used in operating activities (1,099) (2,324) Investing activities Exploration and evaluation assets - (1,413) Acquisition of property, plant and equipment - (10) Proceeds from sale of Wescan Goldfields Inc. 114 - Proceeds from Rio Tinto Exploration Canada Inc. asset acquisition - 4,000 Net cash provided by investing activities 114 2,577 Financing activities Issuances of equity through financings, net of issuance cost - 751 Proceeds from convertible debentures 565 - Lease liability (57) (44) Proceeds from loan payable, net of issuance cost 765 - Net cash provided by financing activities 1,273 707 Net change in cash and cash equivalents 288 960 Cash and cash equivalents, beginning of period 164 553 Cash and cash equivalents, end of period $ 452 $ 1,513 Cash and cash equivalents consists of: Cash $ 452 $ 145 Guaranteed Investment Certificate - 1,368 $ 452 $ 1,513 The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements. Star Diamond Corporation Condensed Interim Consolidated Statements of Changes in Equity (Expressed in thousands of Canadian Dollars) Unaudited Share capital ($) Warrants Broker warrants Contributed surplus Accumulated deficit Total Balance, December 31, 2023 $ 855,831 $ 1,550 $ 52 $ 35,310 $ (892,562) $ 181 Shares issued from private placement (net of issue costs) 480 - - - - 480 Shares issued for exploration and evaluation assets (net of issued costs) 9,163 - - - - 9,163 Modified warrants (406) 395 11 - - - Issuance of shares on redemption of RSUs 45 - - - - 45 Warrants issued - 270 - - - 270 Broker warrants issued - - 1 - - 1 Warrants expired - - - (45) - (45) Share-based payments - - - 131 - 131 Net loss for the period - - - - (2,516) (2,516) Balance, June 30, 2024 $ 865,113 $ 2,215 $ 64 $ 35,396 $ (895,078) $ 7,710 Balance, December 31, 2024 $ 866,002 $ 2,215 $ 64 $ 35,504 $ (898,579) $ 5,206 Issuance of shares on redemption of RSUs 93 - - (93) - - Issuance of shares on debt conversion 153 - - - - 153 Warrants issued on convertible debentures 226 - - - 226 Share-based payments - - - 253 - 253 Net loss for the period - - - - (2,416) (2,416) Balance, June 30, 2025 $ 866,248 $ 2,441 $ 64 $ 35,664 $ (900,995) $ 3,422 The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements. - 4 - Corporate information Star Diamond Corporation (the "Company") was incorporated under the Canada Business Corporations Act on April 29, 1985 and its shares are publicly traded on the Toronto Stock Exchange ("TSX"). The principal activities of the Company are the exploration and evaluation of diamond projects. The Company is located at 700 - 224 4th Avenue South, Saskatoon, Saskatchewan, Canada. Basis of presentation and statement of compliance Statement of compliance These unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2025 (the "Interim Financial Statements"), have been prepared in accordance with IAS 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards ("IFRS"). These Interim Financial Statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2024 (the "2024 Annual Financial Statements"), which have been prepared in accordance with IFRS. The accounting policies and methods of application applied by the Company in these Interim Financial Statements are the same as those applied in the Company's 2024 Annual Financial Statements. The preparation of financial statements in conformity with IFRS also requires management to make estimates and judgments that may have a significant impact on these Interim Financial Statements. Estimates are continuously evaluated and are based on management's experience and expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from these estimates. These Interim Financial Statements were authorized for issue by the Board of Directors on August 12, 2025. Basis of Measurement These Interim Financial Statements have been prepared on the historical cost basis except if otherwise noted. In addition, these financial statements have been prepared using the accrual basis of accounting and are presented in Canadian dollars. Basis of consolidation The Interim Financial Statements include the financial statements of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. All intra-company transactions, balances, income and expenses are eliminated in full on consolidation. The Company's significant subsidiaries include Kensington Resources Ltd. and Shore Mining and Development Corporation, both wholly-owned Canadian corporations. Going concern These Interim Financial Statements are prepared on the assumption that the Company will continue as a going concern and realize its assets and discharge its liabilities and commitments in the normal course of business. Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that cast significant doubt upon the Company's ability to continue as a going concern. At June 30, 2025, the Company had an excess of current liabilities over current assets of $1,692 including cash and cash equivalents of $452. In addition, the Company had negative cash flows from operations of $1,099, an accumulated deficit of $900,995 and currently does not generate revenue. During the six months ended June 30, 2025, the Company closed a non-brokered private placement of convertible debentures of $565 (see note 15) and obtained an unsecured loan of $800 (see note 12). However, the ability of the Company to continue as a going concern and fund its expenses in an orderly manner will require additional forms of financings (see note 23). There is no assurance that the Company will be successful in obtaining the required financing at an acceptable cost as and when needed or at all. Failure to obtain additional financing on a timely basis may cause the Company to postpone exploration and/or evaluation plans, forfeit rights in its properties or reduce or terminate its operations. These Interim Financial Statements do not include any adjustments to carrying values of assets and liabilities, reported expense and the statement of financial position classifications used that would be necessary if the going concern assumption were not appropriate. Critical accounting judgments and key sources of estimation uncertainty The preparation of the Company's unaudited condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. The effect of a change in an accounting estimate is recognized prospectively by including it in total comprehensive profit or loss in the year of the change, if the change affects that year only, or in the year of the change and future years, if the change affects both. Critical judgments in applying accounting policies Going concern The assessment of the Company's ability to continue as a going concern and to raise sufficient funds to pay its ongoing operating expenditures and to meet its liabilities for the ensuing year involves significant judgment based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. The factors considered by management are disclosed in note 3. Impairment indicators for exploration and evaluation assets Management exercises judgment in determining when an indicator of impairment or reversal of impairment exists. In making this determination, management uses several criteria in its assessment of impairment indicators for exploration and evaluation assets including factors such as the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation resource assets are budgeted, results of exploration and evaluation activities on the exploration and evaluation assets and whether sufficient data exists to indicate that the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. 4. Critical accounting judgments and key sources of estimation uncertainty (continued) Classification of business combination or asset acquisition The classification of a transaction as a business combination or asset acquisition depends on whether the assets acquired constitute a business in accordance with the criteria set forth in IFRS 3 Business combinations , which can be a complex judgement. The Company bases its judgements on current facts and various other factors that it believes to be reasonable under the circumstances. Key sources of estimation uncertainty The areas of estimation uncertainty considered by management that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements are discussed below: Impairment of exploration and evaluation assets Where an indicator of impairment exists, an estimate of the recoverable amount of exploration and evaluation assets is made, which is based on the greater of fair value less cost of disposal and value in use. The determination of the recoverable amount requires the use of estimates and assumptions such as discount rates, future commodity prices, future foreign exchange rates, future royalty rates, recoverable grades, and future capital and operating expenditures. Fair value for exploration and evaluation assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset. Cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. If the Company does not have sufficient information about a particular mineral resource property to meaningfully estimate future cash flows, the fair value is estimated by management through comparison to similar market assets and, where available, industry benchmarks. Fair value of acquisitions The determination of fair value of assets acquired, liabilities assumed, and the fair value of the purchase consideration requires the use of various estimates made by management. Acquisition-date fair values for property, plant and equipment are valued using the depreciated replacement cost method. Significant assumptions used in the estimate include replacement costs estimates and adjustments for physical deterioration, functional and physical obsolescence and operational adjustments to bring the assets into use. Acquisition-date fair values for exploration and evaluation assets are valued using a market approach, specifically on a value per resource unit basis derived from comparable transactions. Share-based payment transactions The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock option, volatility and dividend yield and making assumptions about them. Critical accounting judgments and key sources of estimation uncertainty (continued) Provision for environmental rehabilitation The Company assesses its provision for environmental remediation on an annual basis or when new material information becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. In general, these laws and regulations are continually changing, and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting for environmental remediation obligations requires management to make estimates of the future costs the Company will incur to complete the restoration, rehabilitation, and environmental remediation work required to comply with existing laws and regulations at each mining operation. Actual costs incurred may differ from those amounts estimated. Also, future changes to environmental laws and regulations could increase the extent of restoration, rehabilitation, and environmental remediation work required to be performed by the Company. Increase in future costs could materially impact the amounts charged to operations for restoration, rehabilitation, and environmental remediation. The provision represents management's best estimate of the present value of the future restoration, rehabilitation, and environmental remediation obligation. The actual future expenditures may differ from the amounts currently provided. Fort à la Corne asset acquisition On March 26, 2024, the Company acquired a 75% interest in the Fort à la Corne Project (the "Project") from Rio Tinto Exploration Canada Inc. ("RTEC") and assumed responsibility for all future environmental rehabilitation activities related to the project. The Company also acquired certain property, plant and equipment and cash. As consideration for the Transaction the Company issued RTEC 108,204,112 common shares with a fair value of $9,187. After the close of the Transaction: RTEC owned or controlled, in the aggregate, 119,315,222 common shares representing a 19.9% interest in the Company; the Company assumed full control and responsibility for the Project and the previous joint venture agreement has been terminated; RTEC transferred ownership of the trench cutter drill rig used by RTEC to complete its prior bulk sampling program at the Project; RTEC transferred the Bulk Sample Plant located at the Project, including the TOMRA XRT diamond sorting machine; If, within 24 months following the acquisition date, the Company directly or indirectly sells, assigns, transfers or otherwise disposes of, in any manner whatsoever (or enters into any agreement to do so) to one or more Persons (other than an Affiliate of the Company), in one or more related or connected transactions, all or any material part of the assets comprising either (i) the Processing Plant, or (ii) the Trench Cutter and Trench Cutter Equipment (or any right, title or interest in all or any material part of the assets comprising either (i) the Processing Plant, or (ii) the Trench Cutter and Trench Cutter Equipment), the Company covenants and agrees to immediately notify RTEC of such sale and, within 30 days of such sale, pay to RTEC an amount equal to 50% of the proceeds received from such sale, assignment, transfer or other disposition. RTEC and the Company entered into an Investor Rights Agreement whereby, among other things, RTEC was granted certain pre-emptive rights to maintain its 19.9% ownership interest in the Company in connection with future financings undertaken by the Company, and RTEC has agreed to certain standstill protections provided that RTEC will have the right to increase its 19.9% ownership position in the event that the Company receives an acquisition proposal; and Fort à la Corne asset acquisition (continued) the Company assumed responsibility for all future reclamation activities related to the project. RTEC has provided, on the Company's behalf, for up to five years following closing letters of credit in aggregate amount of $9,900 to secure environmental remediation and reclamation activities related to the project (as security for the letters of credit, RTEC has issued a promissory note to the Company with a face value of $9,900 which will be extinguished upon the Company securing letters of credit with another party or in performing the reclamation activities). As the assets acquired represent tangible assets and exploration and evaluation property, and do not consist of processes or outputs, the transaction does not qualify as a business combination under IFRS 3 Business Combinations . Instead, the fair value of the assets acquired, and consideration transferred falls within the scope of IFRS 2 Share Based Payments and is therefore recorded as an asset acquisition. The fair value of the consideration transferred was determined to be the most reliable basis to value the Transaction. The common shares issued were valued at a price of $0.0849 which represents the Company's volume weighted trading value five days prior to the close of the Transaction, resulting in a fair value of $9,187. The consideration transferred was allocated to the exploration and evaluation assets and property, plant and equipment on a relative fair value basis. The acquisition-date fair value of property, plant and equipment received was determined using the depreciated replacement cost method which uses significant assumptions including: replacement cost estimates and adjustments for physical deterioration, functional and physical obsolescence and operational adjustments to bring the assets into use The acquisition-date fair value of the exploration and evaluation assets received was determined using a market approach, specifically on a value per resource unit basis derived from comparable transactions. Contingent consideration related to the future sale of assets was determined to be within the Company's control and therefore was not recognized. A summary of the Company's consideration paid, and the net assets acquired from RTEC as at the acquisition date is as follows: Purchase price Fair value of common shares issued to RTEC $ 9,187 Transaction costs 1,374 Total $ 10,561 Net assets acquired Cash $ 4,000 Exploration and evaluation assets 10,221 Property, plant and equipment 4,024 Environmental rehabilitation provision (7,684) Total $ 10,561 Buffalo Hills asset acquisition On August 1, 2024 Star Diamond and Canterra Minerals Corporation ("Canterra") completed the acquisition of Canterra's 50% interest in the Buffalo Hills Project ("BH Project") in exchange for 17,500,000 Star Diamond common shares. As a condition of the sale, 8,750,000 shares were restricted from trade for a period of 12 months after the acquisition date ("Locked Up Shares"), with the other 8,750,000 shares being unrestricted ("Unrestricted Shares"). In addition to the common shares, Canterra was granted a 1% royalty interest in the property. Subsequent to the acquisition, the Company owns 100% of the BH Project. The transaction was accounted for as an asset acquisition, using the fair value of the share consideration as the transaction value. Transaction costs related to the Buffalo Hills Diamonds Project amount to $53. The Unrestricted Shares were valued at the closing rate of Star Diamond's shares at the date of acquisition ($0.06), resulting in fair value assigned to the E&E asset of $525. The Locked Up Shares were valued using a Black Scholes Pricing Model using the following key assumptions: discount rate of 3.17% and volatility of 80.2%. The value of the Locked Up Shares were determined to be $372, resulting in a total value assigned to E&E assets for the BH acquisition of $950. A summary of the Company's consideration paid and allocated to exploration and evaluation assets as at the acquisition date is as follows: Purchase price Fair value of unrestricted common shares issued to Canterra $ 525 Fair value of restricted common shares issued to Canterra 372 Transaction costs 53 Total $ 950 Receivable As at June 30, 2025 As at December 31, 2024 GST $ 31 $ 20 Other - 6 Total $ 31 $ 26 8. Investment in Wescan Goldfields Inc. During the the three and six months ended June 30, 2025, the Company disposed of 5,707,634 shares of Wescan Goldfields Inc. ("Wescan") for gross proceeds of $114. At June 30, 2025, the Company held nil shares of Wescan (December 31, 2024 - 5,707,634 shares). 9. Property, plant and equipment Plants, Computer buildings software and Cost and leases vehicles Equipment Total Balance, December 31, 2023 $ 946 $ 56 $ 428 $ 1,430 Acquisition - 2 8 10 Acquired (note 5) 505 150 3,369 4,024 Environmental rehabilitation provision adjustment 29 - 4 33 Disposals - - (107) (107) Balance, December 31, 2024 $ 1,480 $ 208 $ 3,702 $ 5,390 Additions 37 - - 37 Balance, June 30, 2025 $ 1,517 $ 208 $ 3,702 $ 5,427 Plants, Computer buildings software and Accumulated depreciation and leases vehicles Equipment Total Balance, December 31, 2023 $ (670) $ (46) $ (420) $ (1,136) Depreciation for the year (90) (21) (598) (709) Disposals - - 104 104 Balance, December 31, 2024 $ (760) $ (67) $ (914) $ (1,741) Depreciation for the period (63) (21) (419) (503) Balance, June 30, 2025 $ (823) $ (88) $ (1,333) $ (2,244) Plants, Computer buildings software and Carrying value and leases vehicles Equipment Total Balance, December 31, 2024 $ 720 $ 141 $ 2,788 $ 3,649 Balance, June 30, 2025 $ 694 $ 120 $ 2,369 $ 3,183 10. Exploration and evaluation assets A summary of the Company's exploration and evaluation assets is as follows: Fort à la Corne Buffalo Hills Properties Diamond Project Total Balance, December 31, 2023 $ - $ - $ - Acquisitions (notes 5 and 6) 10,221 950 11,171 Environmental rehabilitation provision adjustment 183 - 183 Impairment - (950) (950) Balance, December 31, 2024 and June 30, 2025 $ 10,404 $ - $ 10,404

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