Canadian miner Dominion Diamond has reported a loss of $37.9 million for Q2 2017 ended July 31 2016, increasing their first half losses to $73.8 million. Total sales for the quarter fell nearly 24% year on year to $160 million from $209.7 million, while revenues for the first half fell 15% compared to the first half of 2015. The Toronto-based company said it had a loss of 39 cents per share. Dominion's poor performance was not unexpected, considering the fire that occured at the Ekati Diamond Mine process plant on June 23, forcing them to shut it down for three months and lower its 2017 production forecast by 16%, from 5.6 million carats to 4.7 million carats. The company currently expects the process plant to restart on or about September 21 at an estimated total cost of repair of $15 million. The process plant shutdown negatively impacted earnings and cash flow in the period.
On the positive side, the second quarter saw the first sales of Misery Main production from the Ekati mine. Commercial production at Misery Main was declared in May 2016, ahead of plan. The first sales of pre-commercial production occurred in the second quarter of fiscal 2017 and confirmed modelled prices. The statement also reads that the transitional period ahead of the sale of the first Misery Main commercial production continued to impact margins at Ekati and resulted in a $6.4 million impairment of available for sale inventory in the period, adding that sales in the second quarter were lower than the prior year primarily due to a high proportion of lower value goods from the Misery Satellites available for sale in the quarter. Meanwhile, at the Diavik Mine, processing volumes in Q2 were 5% lower than in the same quarter of the prior year due to lower ore availability. Diamonds recovered during the period were 26% lower than in the same quarter of the prior year due to lower processing volumes and lower recovered grades.
CEO Brendan Bell: “We are very pleased to announce the sale of the first production from Misery Main, which provides confirmation of our modelled pricing and has given us even more confidence in the positive cash flow impact of Misery Main through the next phase of the Ekati mine. While the process plant fire and the final stage of the transitional period at Ekati weighed on our earnings and cash flow in the quarter, we are encouraged by our ability to generate positive operating cash flow even under these circumstances. During the quarter we also published a positive feasibility study for the Jay Project and outlined a revised capital allocation strategy, which is underpinned by our strong balance sheet and strong cash flow generation capabilities,” he added.
Dominion Diamond shares have fallen 15% since the beginning of the year, and at the final bell Thursday, shares hit $8.71, a drop of 30% in the last 12 months. On September 8, 2016, the Board of Directors declared an interim dividend of $0.20 per share to be paid in full on November 3, 2016, to shareholders of record at the close of business on October 11, 2016.