Stornoway Diamond Sells 1.7M Carats for $145M in First Full Year of Production

Mining and Exploration
11/01/2018 15:58

In its first full year of commercial production at the Renard Diamond Mine in Quebec, Stornoway Diamond Corp. produced 1.64 million carats from processing 1.96 million tons of ore with an attributable grade of 84 cpht, compared to a plan of 1.69 mcts from 2.00 mtons at 85 cpht (97%, 98% and 99% of targets respectively). The company sold 1.7 mcts in nine tenders in Antwerp and three 'out of tender' sales for gross proceeds of US$144.6 million (C$186.2 m), at an average price of US$85 per carat (C$109 per carat). This compares to FY2017 guidance of 1.8 mcarats sold at pricing targets between US$100 to US$132 per carat. 

Stornoway notes, "Full year diamond sales results were impacted by the timing of tender sales, market factors, and the mix and quality of product sold. Diamond recoveries at the Renard Mine through 2017 were impacted by high levels of diamond breakage, and a higher than expected recovery of smaller diamonds than planned. In addition, diamond pricing for smaller and lower quality items was severely impacted by the impacts of de-monetization in India in late 2016, recovery from which was slow during the course of 2017 and remained incomplete at year end." In early August the Stornoway board of directors approved an extraordinary capital budget of $22 million for a program of plant improvements aimed at improving the quality profile of the Renard production.

The company announced Q4 diamond production of 398,267 carats produced from the processing of 518,817 tons of ore with an attributable grade of 77 cpht, compared to a plan of 415,940 carats from 540,000 tons at 77 cpht (96%, 96% and 100% respectively). Stornoway sold 453,646 in Q4 at two tenders for gross proceeds of US$39 million (C$49.1 m), at an average price of US$86 per carat (C$108 per carat). The recovered grade was 77 cpht, achieving 100% of plan. Carat production was lower than planned due to the unscheduled batch processing of lower grade Renard 65 ore in November for the purpose of obtaining a valuation sample of Renard 65 diamonds? During November 2017, a parcel of 5,741 carats of diamonds was recovered from the processing of specially batched Renard 65 ore in the Renard process plant. This parcel, combined with a 946-carat parcel of Renard 65 diamonds recovered by bulk sampling in 2012 returned a valuation of US$133 per carat. For FY2018 budgeting purposes, The evaluator recommended a modeled price US$140 per carat, with sensitivities of US$129 per carat and US$151 per carat.

In FY2018, Stornoway expects to produce 1.6 mcarats from the processing of 2.5 mtons of ore at an average grade 65 cpht. During the first quarter, ore will be derived primarily from the Renard 2-Renard 3 and Renard 65 open pits. Starting in the second quarter, ore supply will be primarily from the Renard 2 underground mine. Approximately 1.1 mcarats are expected to be larger than the +7 DTC sieve size (+3mm), which Stornoway expects to sell at prices between US$125 and US$165 per carat ( $156 to $206). The outlook for rough diamond pricing in the first half of 2018 is positive, owing to good holiday sales in the principal diamond jewelry retail markets and a flat supply outlook.

Matt Manson, President & CEO commented: “We are pleased that in our first year of production at the Renard Mine we are reporting carats, tonnes and grade results broadly in line with guidance. We continue to see a lower price environment for our diamond sales, in part due to what has been a challenging rough diamond market for a new producer, and in part due to the lower than expected quality and size attributes of our initial production as we process its recovery. For the Stornoway team, 2018 will be a year of process improvement in diamond recovery, as well as focus on the initiation and ramp-up of our underground mine. It will also be a year with renewed focus on the future at Renard, with opportunities evident to us in processing expansion, resource conversion, and new exploration."