Stornoway Diamond Corporation (TSX:SWY)
(the “Corporation” or “Stornoway”) is pleased to
announce 2016 production results for the Renard Diamond Mine and
2017 guidance.
Highlights are as follows:
- 2,074,827 tonnes of open pit ore mined and 399,162 tonnes
processed, increases of +136% and +77% respectively over plan;
- 448,887 carats recovered at an attributable grade of 112 carats
per hundred tonnes (“cpht”), increases of +106% and +15%
respectively over the 2016 plan of 218,400 carats at 97 cpht;
- 38,913 carats sold for gross proceeds of US$7.6 million,
representing un-budgeted pre-production revenue;
- Commercial production declared on January 1st, 2017;
- 2017 production guidance of 1.7 million carats produced and 1.8
million carats sold, at an average diamond price between US$100 and
US$132 per carat;
- 2017 operating cost guidance of C$59.68 per tonne processed
(C$66.49 per carat sold); and,
- 2017 sustaining and deferred capital cost guidance of $C78.7
million.
Matt Manson, President and CEO commented: “In
2016 we completed construction of the Renard Diamond Mine ahead of
schedule and below budget, achieving commercial production at year
end. Today’s press release highlights an operating performance that
was similarly strong, with better than expected production in the
open pits, and development of the underground mine proceeding
comfortably on-schedule. Our ability to bring the project into
production early resulted in significantly higher carat production
than planned for the year, and an earlier than expected first sale
that gave us unbudgeted pre-production revenue. With the first few
months of ore processing behind us, we are pleased with the
performance of the project’s Mineral Resource, with better than
expected grades reflecting better than expected geology at the top
of the Renard 2 and Renard 3 ore bodies. For 2017 we are being
cautious with our diamond price forecasting, due to uncertain
market conditions and a reduction in pricing for smaller and
certain lower quality items. This trend began earlier in 2016,
deepened with the Indian de-monetization events, and was reflected
in the results of our first two diamond sales. Our price
forecasting further reflects higher than expected levels of diamond
breakage that we are experiencing in the process plant and which is
influencing our initial diamond recovery profile. The source of
this breakage is evident to us and a mitigation plan is underway to
reduce it to acceptable levels. Our focus in 2017 is the
maintenance of our good operating performance and the progressive
improvement in the quality of our recoveries as our plant ramp-up
continues. At year end, our (preliminary, unaudited) total
financial liquidity stood at C$159 million1, comprised of cash and
cash equivalents, expected receivables, and undrawn debt
facilities.”
1 Excludes an undrawn C$48 million project
cost-overrun facility.
2016 Production Results
For the year ended December 31, 2016, Stornoway
extracted a total of 7,840,130 tonnes of ore, waste and overburden
from the Renard 2- Renard 3 and Renard 65 open pits, compared to a
plan of 6,339,501 tonnes (+24%). 2,074,827 tonnes of ore were mined
compared to a plan of 879,641 tonnes (+136%). At the end of the
year the ore stockpile stood at 1,842,068 tonnes, excluding an
additional 63,243 tonnes of non-resource Renard 3 material.
A total of 399,162 tonnes 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.
One diamond sale was completed during the year,
being 38,913 carats sold for gross proceeds of US$7.6 million,
representing un-budgeted pre-production revenue.
2,729 meters of development was completed in the
underground mine, compared to a plan of 2,768 meters (-1%). There
has been no recurrence of the water inflow issues that slowed ramp
development towards the end of 2015. The Renard 2 kimberlite was
intersected at the 160 meter level on December 4, 2016 and by year
end 117 meters of development within ore had been completed in good
ground conditions.
Stornoway’s lost time incident frequency rate
for the year was 1.55, with zero incidents of environmental
non-compliance. During the year, the proportion of Stornoway
employees and contractors who were Crees of the Eeyou Istchee
averaged 19%.
2017 Guidance
Mining, Processing and
Sales
In 2017 Stornoway plans to mine 4.4 million
tonnes of ore and waste from the open pits and 0.5 million tonnes
from the underground mine. 2 million tonnes of ore will be
processed for a planned recovery of 1.7 million carats at a grade
of 86 cpht. Full name-plate capacity of 6,000 tonnes per day, based
on 73% plant utilization, is scheduled to be achieved by the end of
the second quarter.
2,300 meters of underground development and
2,600 meters of production stope development is planned in the
underground mine.
Diamond sales of 1.8 million carats are planned
in ten tender sales in Antwerp, Belgium.
Capital and Operating Costs
Operating costs for 2017 are forecast at C$59.68
per tonne processed, being C$70.41 per carat processed and C$66.49
per carat sold.
Capital costs are forecast at C$78.7 million.
This includes scheduled cap-ex of $45.5 million for the underground
mine, and sustaining capital items associated with the project’s
process plant, power plant, and processed kimberlite containment
facility. The capital cost estimate includes $11.8 million of site
service costs associated with capital items but previously shown as
operating general and administrative costs, and $1.7 million of
costs deferred from 2016.
Diamond Pricing and Revenue
Based on the profile of diamonds recovered to
date, market conditions, and the results of early sales and
valuations, Stornoway forecasts average diamond pricing during 2017
of between US$100 and US$132 per carat. This yields a gross revenue
forecast of US$180 million to US$230 million based on planned
diamond sales.
Compared to previous estimates, the 2017 pricing
guidance incorporates reduced pricing for smaller and certain lower
quality rough diamond categories seen during the course of 2016 and
confirmed in the first two Renard sales. This trend, already
underway, was exacerbated by the Indian de-monetization event of
late 2016 which has prompted many diamond producers, including
Stornoway, to temporarily withhold this material from sale.
Stornoway’s 2017 price guidance assumes stabilization of the Indian
currency market and the beginning of price recovery prior to the
end of the second quarter of 2017.
2017 pricing guidance further reflects the
profile of diamonds recovered at Renard in the initial ramp-up
period. During the first few months of operation, the Renard
diamond process plant has liberated a higher proportion of small
diamonds than expected, and has induced higher levels of diamond
breakage than expected. Both of these factors have a strong
influence on average run-of-mine pricing. Diamond breakage occurs
in all diamond process plants, and is measurable and remediable.
Stornoway is undertaking a breakage mitigation plan in conjunction
with 3rd party experts and equipment vendors. This work will be
ongoing through the first half of 2017. Achieved diamond pricing
will continue to be influenced by this breakage until it is
resolved.
Mineral Reserves and Mineral Resources
Year-end Mineral Reserves have been updated
based on mining depletion.
PROVEN MINERAL
RESERVES(1,2)Stockpile(4) |
Carats (millions) |
Tonnes (millions) |
Grade (cpht)(3) |
Renard 2, All
Units |
0.55 |
1.31 |
42 |
Renard
2 |
0.29 |
0.29 |
98 |
CRB-2A |
0.03 |
0.11 |
33 |
CRB |
0.23 |
0.91 |
25 |
Renard
3 |
0.23 |
0.28 |
81 |
Renard
65 |
0.09 |
0.25 |
35 |
Reload |
0.003 |
0.004 |
76 |
Renard 2 UG |
0.004 |
0.007 |
52 |
Total Stockpile Proven Mineral Reserves |
0.87 |
1.85 |
47 |
|
|
|
|
|
PROBABLE MINERAL RESERVES(1,2)Open
Pit |
Carats (millions) |
Tonnes (millions) |
Grade(cpht)(3) |
Renard 2, All
Units |
1.06 |
1.93 |
55 |
Renard
2 |
0.82 |
0.90 |
91 |
CRB-2A |
0.10 |
0.33 |
32 |
CRB |
0.14 |
0.69 |
20 |
Renard
3 |
0.56 |
0.58 |
97 |
Renard
65 |
1.28 |
4.30 |
30 |
Total OP Probable Mineral Reserves |
2.90 |
6.80 |
43 |
|
|
|
|
|
|
|
|
PROBABLE MINERAL
RESERVES(1,2)Underground |
Carats (millions) |
Tonnes (millions) |
Grade(cpht)(3) |
Renard
2 |
15.65 |
19.67 |
80 |
Renard
3 |
0.86 |
1.22 |
70 |
Renard
4 |
1.67 |
3.46 |
48 |
Total UG Probable Mineral Reserves |
18.18 |
24.35 |
75 |
Total Proven and Probable Mineral Reserves(5) |
21.95(-0.31) |
33.00(-0.42) |
67(--) |
|
|
|
|
Notes |
1 Reserve
categories follow the CIM Standards for Mineral Resources and
Mineral Reserves. |
2 Totals
may not add due to rounding. |
3 Carats
per hundred tonnes. Estimated at a +1 DTC sieve size cut-off. |
4 Represents mine and stockpiled ore as of December 31,
2016 |
5 Changes from March 2016 Mineral Reserve estimate shown in
italics |
|
Exclusive of the Mineral Reserves, the Renard
Diamond Mine includes additional Indicated Mineral Resources of 0.9
million carats (3.4 million tonnes at 27 cpht), Inferred Mineral
Resources of 13.4 million carats (24.5 million tonnes at 54 cpht),
and 33.0 to 71.1 million carats of non-resource exploration upside
(76.2 to 113.2 million tonnes at grades ranging from 25 to 168
cpht). All kimberlites remain open at depth. Readers are cautioned
that the potential quantity and grade of any such exploration
target is conceptual in nature, there has been insufficient
exploration to define a mineral resource, and it is uncertain if
further exploration will result in the target being delineated as a
mineral resource.
Conference Call Details
The Corporation’s senior management will host a
conference call on Tuesday February 7, 2017 at 8:30am Eastern Time
to discuss the 2016 results and 2017 guidance.
Participants in Canada may join the call by
dialling 416-340-2216 or 1-800-377-0758 for calls outside of
Canada. A live webcast of the conference call, with guidance
support materials, will be available on the company’s website;
www.stornowaydiamonds.com. The conference call will be
archived on the Company’s website until March 31, 2017.
About the Renard Diamond
Mine
The Renard Diamond Mine is Quebec’s first
producing diamond mine and Canada’s sixth. It is located
approximately 250 km north of the Cree community of Mistissini and
350 km north of Chibougamau in the James Bay region of
north-central Québec. Construction on the project commenced on July
10, 2014, and commercial production was declared on January 1,
2017. Average annual diamond production is forecast at 1.8 million
carats per annum over the first 10 years of mining. Readers are
referred to the technical report dated January 11, 2016, in respect
of the September 2015 Mineral Resource estimate, and the technical
report dated March 30, 2016, in respect of the March 2016 Updated
Mine Plan and Mineral Reserve Estimate for further details and
assumptions relating to the project.
Qualified Persons
Disclosure of a scientific or technical nature
in this press release was prepared under the supervision of M.
Patrick Godin, P.Eng. (Québec), Chief Operating Officer, and Mr.
David Farrow, Pr.Sci.Nat (South Africa) and P.Geo. (BC), Vice
President Diamonds, both “qualified persons” under NI 43-101.
About Stornoway Diamond
Corporation
Stornoway is a leading Canadian diamond
exploration and development company listed on the Toronto Stock
Exchange under the symbol SWY and headquartered in Montreal. Our
flagship asset is the 100% owned Renard Diamond Project, Québec’s
first diamond mine. Stornoway is a growth oriented company with a
world-class asset, in one of the world’s best mining jurisdictions,
in one of the world’s great mining businesses.
On behalf of the BoardSTORNOWAY DIAMOND
CORPORATION/s/ “Matt Manson”Matt MansonPresident and Chief
Executive
For more information, please contact Matt Manson
(President and CEO) at 416-304-1026 x2101or Orin Baranowsky (Vice
President, Investor Relations and Corporate Development) at
416-304-1026 x2103 or toll free at 1-877-331-2232
Pour plus d’information, veuillez contacter M.
Ghislain Poirier, Vice-président Affaires publiques de
Stornoway au 418-254-6550, gpoirier@stornowaydiamonds.com
** Website: www.stornowaydiamonds.com Email:
info@stornowaydiamonds.com **
This press release contains "forward-looking
information" within the meaning of Canadian securities legislation.
This information and these statements, referred to herein as
“forward-looking statements”, are made as of the date of this press
release and the Corporation does not intend, and does not assume
any obligation, to update these forward-looking statements, except
as required by law.
These forward-looking statements include, among
others, statements with respect to Stornoway’s objectives for the
ensuing year, our medium and long-term goals, and strategies to
achieve those objectives and goals, as well as statements with
respect to our beliefs, plans, objectives, expectations,
anticipations, estimates and intentions. Although management
considers these assumptions to be reasonable based on information
currently available to it, they may prove to be incorrect.
Forward-looking statements relate to future
events or future performance and reflect current expectations or
beliefs regarding future events and include, but are not limited
to, statements with respect to: (i) the amount of Mineral
Reserves, Mineral Resources and exploration targets; (ii) the
amount of future production over any period; (iii) net present
value and internal rates of return of the mining operation;
(iv) assumptions relating to recovered grade, size
distribution and quality of diamonds, average ore recovery,
internal dilution, mining dilution and other mining parameters set
out in the 2016 Technical Report as well as levels of diamond
breakage; (v) assumptions relating to gross revenues,
operating cash flow and other revenue metrics set out in the 2016
Technical Report; (vi) mine expansion potential and expected
mine life; (vii) expected time frames for completion of
permitting and regulatory approvals related to ongoing
construction activities at the Renard Diamond Mine; (viii)
the expected time frames for the completion of the open pit and
underground mine at the Renard Diamond Mine; (ix) the expected time
frames for the ramp-up and achievement of plant nameplate capacity
of the Renard Diamond Mine (x) the expected financial
obligations or costs incurred by Stornoway in connection with the
ongoing development of the Renard Diamond Mine; (xi) future
exploration plans; (xii) future market prices for rough
diamonds; (xiii) the economic benefits of using liquefied
natural gas rather than diesel for power generation;
(xiv) sources of and anticipated financing requirements;
(xv) the effectiveness, funding or availability, as the case
may require, of the Senior Secured Loan and the remaining Equipment
Facility and the use of proceeds therefrom; (xvi) the
Corporation’s ability to meet its Subject Diamonds Interest
delivery obligations under the Purchase and Sale Agreement;
(xvii) the impact of the Financing Transactions on the
Corporation’s operations, infrastructure, opportunities, financial
condition, access to capital and overall strategy; (xviii) the
foreign exchange rate between the US dollar and the Canadian
dollar; and (xix) the availability of excess funding for the
operation of the Renard Diamond Mine. Any statements that express
or involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or
phrases such as “expects”, “anticipates”, “plans”, “projects”,
“estimates”, “assumes”, “intends”, “strategy”, “goals”,
“objectives”, “schedule” or variations thereof or stating that
certain actions, events or results “may”, “could”, “would”, “might”
or “will” be taken, occur or be achieved, or the negative of any of
these terms and similar expressions) are not statements of
historical fact and may be forward-looking statements.
Forward-looking statements are made based upon
certain assumptions by Stornoway or its consultants and other
important factors that, if untrue, could cause the actual results,
performances or achievements of Stornoway to be materially
different from future results, performances or achievements
expressed or implied by such statements. Such statements and
information are based on numerous assumptions regarding present and
future business prospects and strategies and the environment in
which Stornoway will operate in the future, including the recovered
grade, size distribution and quality of diamonds, average ore
recovery, internal dilution, and levels of diamond breakage, the
price of diamonds, anticipated costs and Stornoway’s ability to
achieve its goals, anticipated financial performance, regulatory
developments, development plans, exploration, development and
mining activities and commitments, and the foreign exchange rate
between the US and Canadian dollars. Although management considers
its assumptions on such matters to be reasonable based on
information currently available to it, they may prove to be
incorrect. Certain important assumptions by Stornoway or its
consultants in making forward-looking statements include, but are
not limited to: (i) required capital investment and estimated
workforce requirements; (ii) estimates of net present value
and internal rates of return; (iii) recovered grade, size
distribution and quality of diamonds, average ore recovery,
internal dilution, mining dilution and other mining parameters set
out in the 2016 Technical Report as well as levels of diamond
breakage, (iv) receipt of regulatory approvals on acceptable terms
within commonly experienced time frames; (v) anticipated
timelines for ramp-up and achievement of nameplate capacity at the
Renard Diamond Mine, (vi) anticipated timelines for the development
of an open pit and underground mine at the Renard Diamond Mine;
(vii) anticipated geological formations; (viii) market prices
for rough diamonds and their potential impact on the Renard Diamond
Mine; (ix) the satisfaction or waiver of all conditions under the
Senior Secured Loan and the remaining Equipment Facility to allow
the Corporation to draw on the funding available under those
financing elements; (x) Stornoway’s interpretation of the
geological drill data collected and its potential impact on stated
Mineral Resources and mine life; (xi) future exploration plans and
objectives; (xii) the Corporation’s ability to meet its
Subject Diamonds Interest delivery obligations under the Purchase
and Sale Agreement; and (xiii) the continued strength of the US
dollar against the Canadian dollar.
By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and
specific, and risks exist that estimates, forecasts, projections
and other forward-looking statements will not be achieved or that
assumptions do not reflect future experience. We caution readers
not to place undue reliance on these forward- looking statements as
a number of important risk factors could cause the actual outcomes
to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates, assumptions and intentions
expressed in such forward-looking statements. These risk factors
may be generally stated as the risk that the assumptions and
estimates expressed above do not occur, including the assumption in
many forward-looking statements that other forward-looking
statements will be correct, but specifically include, without
limitation: (i) risks relating to variations in the grade,
size distribution and quality of diamonds, kimberlite lithologies
and country rock content within the material identified as Mineral
Resources from that predicted; (ii) variations in rates of
recovery and diamond breakage; (iii) the uncertainty as to
whether further exploration of exploration targets will result in
the targets being delineated as Mineral Resources;
(iv) developments in world diamond markets; (v) slower
increases in diamond valuations than assumed; (vi) risks
relating to fluctuations in the Canadian dollar and other
currencies relative to the US dollar; (vii) increases in the
costs of proposed capital, operating and sustainable capital
expenditures; (viii) increases in financing costs or adverse
changes to the terms of available financing, if any; (ix) tax
rates or royalties being greater than assumed; (x) uncertainty
of results of exploration in areas of potential expansion of
resources; (xi) changes in development or mining plans due to
changes in other factors or exploration results; (xii) risks
relating to the receipt of regulatory approvals or the
implementation of the existing Impact and Benefits Agreement with
aboriginal communities; (xiii) the effects of competition in
the markets in which Stornoway operates; (xiv) operational and
infrastructure risks; (xv) execution risk relating to the
development of an operating mine at the Renard Diamond Mine;
(xvi) failure to satisfy the conditions to the funding or
availability, as the case may require, of the Senior Secured Loan
and the Equipment Facility; (xvii) changes in the terms of the
Forward Sale of Diamonds, the Senior Secured Loan or the Equipment
Facility; (xviii) the funds of the Senior Secured Loan or the
Equipment Facility not being available to the Corporation;
(xix) the Corporation being unable to meet its Subject
Diamonds Interest delivery obligations under the Purchase and Sale
Agreement; (xx) future sales or issuances of Common Shares
lowering the Common Share price and diluting the interest of
existing shareholders; and (xxi) the additional risk factors
described herein and in Stornoway’s annual and interim MD&A,
its other disclosure documents and Stornoway’s anticipation of and
success in managing the foregoing risks. Stornoway cautions that
the foregoing list of factors that may affect future results is not
exhaustive and new, unforeseeable risks may arise from time to
time.