Stornoway Diamonds Ends Memorable 2016 In Strong Position

Mining and Exploration
24/02/2017 10:05

Stornoway Diamond Corporation has issued its annual results, detailing a memorable 2016. Their Renard Diamond Mine officially opened on October 19, 2016, and following the commencement of ore processing on July 15, 2016, commercial production was formally declared on January 1, 2017. The first sale of Renard Diamonds was held during November in Antwerp in Belgium. In total, 38,913 carats were sold at an average price of US$195 per carat, for proceeds of US$7.6 million (C$10.2 m). For the three months ended December 31, 2016, the Corporation reported a net income of US$39.7 million (C$52.0 m), and for the year ended December 31, 2016, it reported net income of US$15 million (C$19.6 m). Matt Manson, President and CEO commented: “Stornoway’s FY2016 results confirm the final completion of the Renard Mine well below our original budget estimates and ahead of schedule. With the capital period now over and the attainment of commercial production, we are continuing our processing ramp-up and steadily increasing the volume of goods offered at our diamond sales."

Total project costs at the end of the year were US$589.1 (C$771.2 m), or 99% of budget, and the deferred US$2.1 million (C$2.8 m) of costs to 2017, giving a final cost to complete estimate of US$591.2 million (C$774 m), US$28.3 million (C$37 m) below the initial capital budget established in July 2014. As detailed at the beginning of February 2017, Stornoway achieved 2016 production results from its Renard Mine in Quebec that far outstripped its projected output. For the year ended December 31, 2016, Stornoway mined 2,074,827 tons of ore from the Renard 2- Renard 3 and Renard 65 open pits, compared to a plan of 879,641 tons (+136%). At the end of the year the ore stockpile stood at 1,842,068 tons, excluding an additional 63,243 tons of non-resource Renard 3 material. A total of 399,162 tons of ore were processed with carat production of 448,887 carats, compared to a plan of 218,400 carats (+106%), with an attributable grade of 112 cpht compared to a plan of 97 cpht (+15%). The higher tonnage of ore processed was due to the earlier than expected availability of the plant, and the higher grade was due to a better than expected mix of ore units available in the Renard 2-3 open pit, the company reported.

As mentioned above, net income in 2016 increased to US$15 million compared to a US$2.8 million net loss during the eight months ended ended December 31, 2015, largely due to a change of US$35.4 (C$46.4) million deferred tax asset recorded in the fourth quarter of 2016. Stornoway’s first diamond sale occurred between November 14 -23, 2016 in Antwerp, Belgium. In total, 38,913 carats were sold at an average price of US$195 per carat, for proceeds of $10.2 million (US$7.6 million). The diamonds sold in this first sale represent a portion of production recovered during the initial commissioning and ramp-up of Renard in August and September 2016. Recent events in India surrounding demonetization impacted pricing and demand for certain smaller and lower quality items, as a result, a quantity of these were withdrawn from the sale. Because of this, and because of a higher than expected proportion of small diamonds recovered during the ramp-up period attributable, in part, to plant-induced diamond breakage, the result of this first sale cannot be taken as representative of the longer term pricing profile of the project. Two additional tender sales of Renard diamonds have occurred subsequent to the year end, with a third scheduled prior to the end of the first quarter of 2017. 

CEO Manson concludes: "Two additional tenders have now been completed subsequent to the year end, and while pricing continues to be impacted by Indian market conditions and our diamond recovery profile, we are seeing improvements in the market for the lower quality items and strong premiums in larger, higher quality goods. Stornoway will complete one additional sale prior to the end of the current quarter.” Matt Manson continued: “Our successful project build and earlier operational start-up has contributed to a greatly strengthened balance sheet compared to what was contemplated in our original July 2014 project financing plan. With $165 million of total liquidity at year-end, including $100 million of undrawn senior debt, and our sales proceeding, we are in a strong position as we start 2017.”