Star Diamond : 2024 First Quarter Report

1st Quarter Report

2024

Management's Discussion & Analysis

March 31, 2024

1

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

The following discussion and analysis is prepared by Management as of May 13, 2024 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 months ended March 31, 2024, as well as the audited consolidated financial statements of the Company for the years ended December 31, 2023, in each case available on SEDAR+ at www.sedarplus.ca. The Company prepared its financial statements for the period ended March 31, 2024 and 2023, in accordance with International Accounting Standard ("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

The Company was incorporated on April 29, 1985 under the Canada Business Corporations Act and is listed on the Toronto Stock Exchange under the symbol "DIAM". The Company has its head office at 600, 224 - 4th Avenue South, Saskatoon, Saskatchewan, S7K 5M5 and its registered office at 4500, 855 - 2nd Street SW, Calgary, Alberta, T2P 4K7.

Star Diamond is a Canadian natural resource company focused on exploring and developing Saskatchewan's diamond resources. Star Diamond holds a 100% interest in the Fort à la Corne Project (which includes the Star

• Orion South Diamond Project, or the "Project"). These properties are located in central Saskatchewan, in close proximity to established infrastructure, including paved highways and the electrical power grid, which provide significant advantages for future mine development.

The Company also holds a 50% interest in the exploration and evaluation properties and assets of the Buffalo Hills-JV located in north-central Alberta, Canada. Canterra Minerals Corporation ("Canterra") holds the remaining 50% interest. Canterra is the operator of the Buffalo Hills JV.

Corporate Developments

On March 26, 2024, Star Diamond and Rio Tinto Exploration Canada Inc. ("RTEC") completed the previously announced transaction (the "Transaction") whereby RTEC has transferred to Star Diamond its 75% interest in the Fort à la Corne Project. As consideration for the Transaction the Company issued RTEC 108,204,112 common shares with a deemed fair value of $9.2 million. In exchange for the common shares and RTEC's 75% interest in the Fort à la Corne Project, RTEC also transferred certain pieces of property, plant and equipment and $4.0 million.

After the close of the Transaction:

• RTEC owns or controls, in the aggregate, 119,315,222 common shares representing a 19.9% interest in Star Diamond;
• Star Diamond has full control and responsibility for the Fort à la Corne Project and the previous joint venture agreement has been terminated;
• RTEC has transferred to Star Diamond ownership of the trench cutter drill rig used by RTEC to complete its prior bulk sampling program at the Fort à la Corne Project;

Star Diamond Corporation - Q12024 MD&A

2

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

• RTEC has transferred to Star Diamond the Bulk Sample Plant located at the Fort à la Corne Project, including the TOMRA XRT diamond sorting machine;
• RTEC and Star Diamond have 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 Star Diamond in connection with future financings undertaken by Star Diamond, 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 Star Diamond receives an acquisition proposal; and
• Star Diamond has assumed responsibility for all future reclamation activities related to the Fort à la Corne Project. RTEC has provided on Star Diamond's behalf, for up to five years following closing, letters of credit in aggregate amount of $9.9 million to secure environmental remediation and reclamation activities related to the Fort à la Corne Project (as security for the letters of credit, RTEC has issued a promissory note to Star Diamond with a face value of $9.9 million which will be extinguished upon Star Diamond securing letters of credit with another party or in performing the reclamation activities).

On January 26, 2024, the Company closed the second and final tranche of the Offering for gross proceeds of $785,901 bringing the total proceeds raised to $1,110,041. Pursuant to the closing of the second tranche, the Company issued: i) 8,548,905 units of the Company ("Units") at a price of $0.09 per Unit for gross proceeds of $769,401, with each Unit consisting of one common share of the Company (which is not a "flow-through share") and one share purchase warrant (a "Warrant"); and ii) 150,000 "flow-through" units ("FT Units") at price of $0.11 per FT Unit for gross proceeds $16,500, with each FT Unit consisting of one common share of the Company and one Warrant, each of which will qualify as a "flow-through share" for the purposes of the Income Tax Act (Canada). Each Warrant will entitle the holder thereof to acquire one additional common share of the Company (which shall not be a "flow-through share") at an exercise price of $0.14 for a period of 36 months from the date of issuance.

Effective March 1, 2024, the Board of Directors appointed Ewan Mason to the position of President and Chief Executive Officer. Mr. Mason had served as Interim President and Chief Executive Officer since January 1, 2023.

Fort à la Corne Project

The Company holds a 100% interest in the Fort à la Corne Project (see March 26, 2024 news release: Star Diamond Corporation Completes Acquisition of Rio Tinto's 75% interest in Fort à La Corne Diamond Project) which includes the Star and Orion South Kimberlites. The Project is 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.

Star Diamond Corporation - Q12024 MD&A

3

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

Figure 1: Location Map of the Star-Orion South Diamond Project.

Recent activities relating to the Star - Orion South Diamond Project and Fort à la Corne mineral properties

During the first quarter of 2024, Nelson Karun was appointed as a Diamond Specialist to join the technical team. Mr. Karun's work is initially focused on the detailed characterization of the Star and Orion South diamond parcels. This work is required as part of the Revised Mineral Resource Estimate. In addition, Star Diamond continued to work with RTEC and Saskatchewan Ministry of Environment representatives to ensure that, as part of the closing of the Agreement between Star Diamond and RTEC, all mineral dispositions, mineral leases and operating permits were transferred to Star Diamond.

Buffalo Hills mineral properties

The Company holds a 50% interest in the exploration and evaluation properties and assets of the Buffalo Hills- JV located in north-central Alberta, Canada. Canterra Minerals Corporation ("Canterra") holds the remaining 50% interest and is the operator of the Buffalo Hills-JV.

Outlook

Fort à la Corne Project

Subsequent to the successful close of the Agreement with RTEC (see "Corporate Developments"), 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 aims to prepare a revised Mineral Resource estimate for the Star - Orion South Diamond Project, which will form the foundation of an

Star Diamond Corporation - Q12024 MD&A

4

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

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 will integrate 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 is expected to commence later in 2024.
• These developments will likely give rise to the ability to complete the updated PFS within a two-year time frame and the Feasibility Study shortly thereafter. We anticipate these major studies will be completed at a substantially lower expenditure level than was previously contemplated.

Revised Mineral Resource Estimate

The goal of the revised mineral resource estimate is to integrate all of the drilling and diamond results recently generated by the Fort à la Corne Joint Venture, with archival data used to build the geological model, which forms the basis of the mineral resource estimate. Importantly, the diamond parcels recovered from the ten Trench Cutter ("TC") holes drilled on the Star kimberlite were recovered in an efficient, modern Bulk Sampling Plant ("BSP") that ensures excellent diamond liberation and recovery. The BSP includes High Pressure Grinding Rolls that ensure liberation of the small diamonds (1-6 millimetre) locked in kimberlite, that are subsequently recovered by an efficient Dense Media Separator that operates in the same narrow 1 to 6 millimetre size range. The small diamonds (+1, +3 and +5 DTC) from the Early Joli Fou ("EJF") kimberlite unit of both Star and Orion South include significant proportions of D coloured octahedral diamonds, which have significant value (US$30 -US$50 per carat), which is unusually high for these small diamonds. The integration of the TC diamond data in the evaluation parcel aims to strengthen the diamond grade and price used in the Mineral Resource estimate. The aim of this work is to prepare a rigorously constrained Mineral Resource estimate by the end of Q2 2024. This revised Mineral Resource estimate will provide an improved foundation for the revised PFS.

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

Star Diamond Corporation - Q12024 MD&A

5

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

is both expensive and time consuming. The confidence generated in the Orion South diamond price will add to the precision of the mineral resource estimate.

Updated PFS

The scoping of an updated PFS is scheduled to commence in 2024 with the initial work 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 mineral properties

Management continues to review the recent results from the diamond valuation and typing analysis. Discussions are ongoing with Canterra to determine possible work programs and a potential path forward for the asset. A more detailed update on activities at the Buffalo Hills-JV will be provided as it becomes available.

Financial Highlights

Selected financial information of the Company for the quarters ended March 31, 2024 and 2023 is summarized as follows:

	Three months ended	Three months ended
	March 31, 2024	March 31, 2023
	$	$
Net loss (millions)	0.9	0.3
Net loss per share (1)	0.00	0.00
Total assets (millions)	19.5	2.4
Total non-current liabilities (millions) (2)	7.7	-
Working capital (millions)	2.2	1.3

1. Basic and diluted.
2. At March 31, 2024, Non-current liabilities totaling $7.7 million were comprised of an environmental rehabilitation provision of $7.6 million and a lease liability of $0.1 million. There were no non-current liabilities reported at March 31, 2023.

Results of Operations

For the quarter ended March 31, 2024, the Company recorded a net loss of $0.9 million, or $0.00 per share, compared to a net loss of $0.3 million, or $0.00 per share, for the quarter ended March 31, 2023. The increase in net loss quarter over quarter was due primarily to the marked-to-market change on the Wescan Goldfields Inc. ("Wescan") investment combined with increases to Administration, Corporate development (marketing costs) and Exploration and evaluation expenditures.

Interest and other income

For the three months ended March 31, 2024 and 2023, the Company reported interest and other income of $6 thousand and $18 thousand, respectively. The Company invests excess cash reserves in interest-bearing short- term deposits while ensuring funds are available for cash outflow requirements associated with the Company's

Star Diamond Corporation - Q12024 MD&A

6

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

exploration and evaluation projects. Other revenue is measured at the fair value of the consideration received or receivable for goods and services in the normal course of business.

Expenses

Expenses incurred during the quarter ended March 31, 2024 were $0.9 million compared to $0.7 million for the comparative period in 2023. The $0.2 million increase was due to increased Administration, Corporate development and Exploration and evaluation expenditures during the current period. These amounts also include $.05 million of non-cashshare-based payments that were expensed during the quarter ended March 31, 2024 (March 31, 2023 - $nil).

Administration, consulting and professional fees and corporate development expenditures were $0.6 million for the current quarter compared to $0.4 million for the comparative period in 2023. This $0.2 million quarter over quarter increase was primarily due to increased marketing expenditures, management fees and non-cashshare-based compensation costs.

Exploration and evaluation expenditures were $0.3 million for the quarter ended March 31, 2024 compared to $0.2 million for the comparative period in 2023. During the current period a diamond specialist was added to expedite the Company's diamond sorting, valuation and pricing exercise. Approximately 67%, or $0.2 million (March 31, 2023 - 55% or $0.1 million), of the exploration and evaluation expenditures were made up of compensation costs, including share-based payments, incurred by the Company.

Use of flow-through proceeds

Flow-through proceeds raised during 2023 and 2024	$	340
Flow-through eligible expenditures incurred to March 31, 2024		(283)
Remaining flow-through eligible expenditures to be incurred	$	57

Investment in Wescan Goldfields Inc.

At March 31, 2024 and December 31, 2023, the Company held 5.8 million shares or 10.8% of Wescan, a publicly traded company listed on the TSX Venture exchange. The fair value of this investment, based on the closing trading price at March 31, 2024 was $0.2 million (December, 2023 - $0.3 million).

Financing

During the quarter ended March 31, 2024, the Company completed the second and final tranche of a private placement whereby an aggregate of 8,548,905 shares ("Units") were issued for gross proceeds of $0.8 million along with 150,000 Flow-through units ("FT Units") were issued for gross proceeds of $0.02 million. Each Unit was comprised of one common share and one common share purchase warrant. Each warrant entitles the holder thereof to purchase one common share at a price of $0.14 for a period of 36 months from the date of issuance.

Summary of Quarterly Results

Summarized financial data presented in the table below has been prepared in accordance with IFRS. This data should be read in conjunction with the Company's condensed consolidated interim financial statements and consolidated annual financial statements for the respective periods. All net income (loss) figures are presented in millions, except for the net income (loss) per common share amounts (basic and diluted).

Star Diamond Corporation - Q12024 MD&A

7

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

			2024			2023			2022
			Qtr 1	Qtr 4	Qtr 3	Qtr 2	Qtr 1	Qtr 4	Qtr 3	Qtr 2
	Total assets
	19.5	1.2	1.3	1.8	2.4	3.1	70.0	70.9
	Total liabilities	10.2	1.0	0.7	0.7	0.4	0.7	1.0	1.4
	Expenses	0.9	1.0	0.6	0.6	0.7	1.3	0.3	0.7
	Net loss	(0.9)	(1.0)	(0.6)	(0.9)	(0.3)	(66.7)	(0.5)	(0.7)
	Net loss per share	0.00	0.00	0.00	0.00	0.00	0.14	0.00	0.00
	Wtd. Avg. Shares outstanding	494.8	482.7	476.4	476.0	476.0	476.0	476.0	473.9

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 of key management personnel, and directors, including payments made or payable to related parties owned by executive officers and directors, is as follows:

	March 31, 2024	March 31, 2023
Director fees	$ 25	$ 42
Salaries to key management personnel	96	26
Consulting and management fees to related companies	106	49
Share-based payments	48	2
Total compensation paid to key management personnel	$ 275	$ 119

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 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:

	March 31, 2024	March 31, 2023
Administration	$ 172	$ 119
Exploration and evaluation	103	-
Total compensation paid to key management personnel	$ 275	$ 119

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.

At March 31, 2024 the Company had $0.3 million (March 31, 2023 - $0.6 million) in cash and cash equivalents and working capital of $2.2 million (March 31, 2023 - $(0.3) million). The increase in working capital was a result of amounts receivable from RTEC on the completion of the Transaction combined with proceeds received

Star Diamond Corporation - Q12024 MD&A

8

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

For the three months ended March 31, 2024 and 2023

(in thousands of Canadian dollars, except as otherwise noted)

www.stardiamondcorp.com

TSX: DIAM

from the January 2024 close of the second and final tranche of the non-brokered private placement offset by expenses incurred during the quarter. 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.

Outstanding Common Shares, Options, Warrants, RSUs and DSUs

At March 31, 2024, and the date of this report, the Company had:

	March 31, 2024		Date of this report
Common shares		599,573,981	600,073,981
Warrants and broker warrants		29,118,391	29,118,391
Stock Options		24,489,500	24,739,500
Restricted Share Units		1,500,000	1,000,000
Deferred Share Units		2,162,250	2,162,250

A summary of the warrants and broker warrants outstanding and exercisable at March 31, 2024 is as follows:

Exercise Price	Number Outstanding	Expiry Date
$ 0.40	362,284	April 6, 2024
$ 0.40	105,527	April 21, 2024
$ 0.151	13,959,734	October 6, 2025
$ 0.151	2,706,933	October 21, 2025
$ 0.11	159,090	December 29, 2026
$ 0.14	3,105,818	December 29, 2026
$ 0.09	8,719,005	January 26, 2027

1. During the first quarter of 2024, the Company extended the expiry date and amended the exercise price of those warrants expiring April 6 and April 21, 2024 (see February 8, 2024 news release: Star Diamond Announces Amendment to Warrants).

The following table summarizes the quarter's stock options activities as follows:

	Three months ended		Year ended
		March 31, 2024	December 31, 2023
		Weighted-average		Weighted-average
	Options	exercise price	Options	exercise price
Outstanding, beginning of period	24,489,500	$ 0.17	18,477,700	$ 0.21
Granted	-	-	7,760,000	0.09
Exercised	-	-	-	-
Expired	-	-	(1,748,200)	0.19
Outstanding, end of period	24,489,500	$ 0.17	24,489,500	$ 0.17

The following table summarizes the quarter's Restricted Share Unit activities as follows:

	Three months ended	Year ended
	March 31, 2024	December 31, 2023
Outstanding, beginning of period	1,500,000	3,426,600
Granted	-	1,500,000
Redeemed for common shares from treasury	-	(3,323,266)
Forfeited	-	(103,334)
Outstanding, end of period	1,500,000	1,500,000

Star Diamond Corporation - Q12024 MD&A

9