Stornoway Diamonds got its production levels back on track in Q4 2018 after "challenging" year of ramping up their underground operations at the Renard mine in Canada, giving them the confidence to raise their production guidance for 2019. Production, sales and revenue all declined significantly from the miner's 2017 levels, but they recorded a 24% increase in the average price per carat earned despite a market downturn in the second half of 2018.
Annual production from the Renard mine fell 21% to 1.3 million carats from 1.64 million carats, with the number of carats sold falling by 41% to 1 million from 1.7 million. This decline resulted in a 24% decrease in total revenues, to C$140.7 million (US$106m) from C$186 million (US$140 million), while the average price per carat took a welcome turn upward to US$105 per carat from US$85 per carat in 2017, notwithstanding a sub-par performance in Q4 when that figure fell to US$92 per carat, reflecting a challenging rough diamond market over the period. The company attributed the market woes to, "The further weakening Indian Rupee, the lack of available credit available to Indian diamantaires, and the fluctuating seasonal effects caused by important Indian and Jewish holidays in the third and fourth quarters."
Stornoway's fourth-quarter production, however, returned to 2017 levels, as the Canadian miner recovered 485,616 carats compared to 453,646 carats in Q4 2017. The miner's Q4 recovery grade also rose to 80 carats per hundred tonnes (cpht) of ore, a 45% improvement over Q3, due to the mining of higher grade ore, yet it still falls short of the attributable grade of 84 cpht for FY 2017. Full FY2018 year mine production was 1.32m carats recovered from the processing of 2.33m tonnes of ore at an attributable grade of 57 cpht. Carats recovered and processed were below the low end of the revised guidance. In 2019, Stornoway expects to produce between 1.80 and 2.10 mcarats from the processing of 2.40 to 2.55m tonnes of ore, and expects to sell between 1.80 and 2.10m carats in 8 tender sales in Antwerp at prices between US$80 and US$105 per carat.
Patrick Godin, President and CEO of Stornoway, stated, “2018 was a challenging year, with the ramp-up of underground production impacted by delays in equipment deliveries, a competitive labor market and by the presence of more low-grade mineralization than anticipated on the northern margin of the Renard 2 orebody, where the initial underground production ore was sourced." He adds that "Our third and fourth quarter production results have demonstrated significant improvements in grade and carat recoveries as mining progressed towards the high-grade center of the Renard 2 kimberlite. We expect these results to continue into 2019, as we continue mining Renard 2 from the 290-meter level and bring into production the higher-grade Renard 3 orebody from underground."
Concerning diamond pricing, Stornoway notes that the real price index trend shows a steady increase (+27%) in the real price index from the first sale in November 2016 to June 2018, as the rough market conditions improved, goods quality and size improved and tender viewing and bids increased as buyers’ familiarity with the Renard production increased. The second half of 2018 saw a significant rough market price correction resulting in a price index decrease of -13% as compared to June 2018 index.