Stornoway Q3 Results: Production Up, Improved Prices, Breakage Continues

Mining and Exploration
10/10/2017 15:38

Stornoway Diamond Corporation has released its third quarter production and sales results from its Renard Diamond Mine in Quebec, with better ore grades leading to higher carat recoveries; the junior miner also saw growth in carats sold and an improving price per carat, though the issue of diamond breakage has yet to be solved. During the quarter, 506,380 tons of ore were processed compared to the plan of 540,000 tons (-6%). However, better than expected ore grades in the Renard 2-Renard 3 open pit led to higher diamond production than planned, with 442,154 carats produced at 87 cpht compared to 422,475 carats at 78 cpht (+5% and +12% respectively). Two tender sales were completed in Antwerp during the quarter. In total, 438,632 carats were sold for gross proceeds of US$41.3 million (C$51.6 million), at an average price of US$94 per carat (C$118 per carat). This compares to an average price of US$81 achieved in the first quarter and US$87 per carat in the second quarter.

At the beginning of third quarter, Stornoway completed its 6th sale of the year, with 151,135 carats sold at an average price of US$101 per carat (C$128 per carat). Following the traditional summer recess for the rough diamond market in August, Stornoway completed its 7th and largest sale to date, with 287,497 carats sold at an average price of US$90 per carat (C$112 per carat). During this period the rough diamond market experienced a price correction after several months of gains, estimated at between 6% and 8% on an average weighted basis. This is reflected in the prices achieved in Stornoway’s tender sales at the beginning and end of the quarter. The average pricing achieved in the Renard diamond tender sales is impacted by, amongst other things, the proportion of small diamonds in the sales mix, market factors, and the ongoing issues of diamond breakage in the process plant, which reduces the proportion of larger diamonds available for sale and influences the average quality assortment.

Since ore processing at Renard began, the project has experienced high levels of diamond breakage. This is manifested most directly in the proportion of larger diamonds recovered, and in the average quality profile. Both factors negatively impact the achieved average diamond price at sale. The source of the breakage has been localized primarily in the secondary cone crusher and tertiary high pressure grinding rolls crusher, and appears associated with the high proportion of hard, internal dilution inherent in Renard ore. 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, to be funded from existing financial resources.

Matt Manson, President & CEO commented: “The third quarter at the Renard diamond mine saw continued robust carat production with a 12% beat on recovered grade compared to our mine plan. uring the quarter we saw growth in carats sold, gross sales revenue, and average pricing compared to the first half of the year, despite a rough market correction at the end of the quarter which served to slow the rate of increase. At the process plant, we are achieving steady name-plate capacity in processing, and have broken ground on our new ore/waste sorting circuit that we expect will positively impact the quality of our diamond production and achieved pricing at sale." Despite the steady increase in pricing achieved during the course of the year on a quarter by quarter basis, it is likely that the annual average price for the fiscal year ending December 31, 2017 will fall below Stornoway’s 2017 pricing guidance of US$100 to US$132 per carat given the outlook for the rough diamond market for the remainder of the year. Stornoway will hold two tender sales in Antwerp in the fourth quarter.