Stornoway Diamond Corporation (TSX:SWY)
(the “Corporation” or “Stornoway”) announced today
its results for the truncated quarter and fiscal year ended
December 31, 2015. These results are pursuant to Stornoway’s recent
change in year end from April 30 to December 31, undertaken to
better align the Corporation’s financial, operational and
regulatory reporting ahead of first production at the Renard
Diamond Project.
Quarter ended December 31, 2015 and
FY2015 Highlights
(All quoted figures as at December 31, 2015 and
in CAD$)
- Progress at the Renard Diamond Project continues well within
the planned schedule and budget.
- Incurred costs and commitments at the quarter-end totalled
$548.5 million, or 71% of budget.
- Construction progress stood at 63.3% compared to (an initial)
plan of 59.6%, with detailed engineering substantially
complete.
- On site manpower during the month of December averaged 384
workers, of which 21% were Crees of the Eeyou Istchee.
- Mining in the Renard 2-3 and Renard 65 open pits stood at
5,975,813 tonnes, or 104% of plan, and underground mining
development stood at 887 meters, or 72% of plan.
- During the two month period ended December 31, 2015,
construction focused on secondary steel, mechanical, piping and
electrical installation and on the project’s major facilities such
as the process plant, LNG storage facility, power plant, primary
crusher, water treatment facility and processed kimberlite
load-out. All were well advanced at December 31, 2015.
- For the two month period ended December 31, 2015, the
Corporation reported a net loss of $4.3 million or $0.01 per share
basic and fully diluted, and for the eight-month period ended
December 31, 2015 a net loss of $3.7 million or $Nil per share
basic and fully diluted.
- Cash, cash equivalents and short-term investments stood at
$209.1 million1. Excess financing capacity available to complete
the project, comprising surplus cash and available cost-overrun
facilities, is now forecast to be $117 million, assuming the
satisfaction of all covenants and conditions precedent relating to
future funding commitments and a CAD$:US$ conversion rate of
$1.35.
Subsequent
to December 31, 2015, the project’s construction schedule was
re-baselined with first ore delivery to the Renard diamond process
now expected by the end of September 2016 and commercial production
(60% of plant capacity achieved over 30 days) expected by December
31, 2016. This represents a five month improvement on the previous
schedule, which assumed commercial production in the second
calendar quarter of 2017. The re-baselined schedule resulted in a
commensurate reduction in the forecast cost to complete, from $811
million to $775 million.
1 Assuming C$: US$ conversion rate of $1.3840
Matt Manson, President and CEO, commented
“Construction progress at Renard continued to track ahead of
schedule during the last two months of our truncated FY2015, which
gave us the confidence to re-baseline our schedule and cost to
complete forecasts for future progress reporting. At the end of
February construction progress stood at 74.1% compared to the new
plan of 72.4%, as our construction team continued to out-perform
expectations. An updated mine plan for the project, based on the
results of the updated 2015 Mineral Resource and revised
construction schedule, will be released shortly. With the diamond
market beginning to recover after a challenging 12 months, we look
forward to achieving first diamond production at Renard later this
year based on a foundation of solid project execution and with a
stronger than expected balance sheet.”
Financial Summary
Stornoway ended the truncated quarter with cash,
cash equivalents and short-term investments of $209.1 million,
compared with $290.3 million at the end of the previous quarter.
The first and second tranches of payment deposits under Stornoway’s
streaming agreement with Orion Mine Finance, the Caisse de dépôt et
placement du Québec and Blackstone Tactical Opportunities were
received in March 2015 and September 2015 respectively. The third
payment deposit of US$90 million is expected to be received on
March 31, 2016, following which Stornoway expects to draw on a $100
million senior secured loan to complete mine development.
Stornoway’s current cash resources and committed funds are
sufficient to cover planned mine development expenses, financing
and corporate costs during calendar 2016.
The Corporation currently forecasts excess
funding capacity available to complete the project of $117 million,
comprised of $69 million of cash, undrawn debt facilities,
receivables and expected mine tax credits, and $48 million of
undrawn cost overrun facilities. This forecast assumes the
attainment of commercial production by December 31, 2016, a project
cost of $775 million (which includes assumed levels of escalation
and contingencies), the satisfaction of all covenants and
conditions precedent for future funding, and a CAD$: US$ exchange
rate of $1.35 for unfunded US dollar denominated financing
commitments. The forecast excludes US$26 million of revenue
previously forecast to fall within the pre-production period and
which, given the acceleration of the expected date of commercial
production, will now fall outside of the capital expenditure
period. It further excludes the proceeds from the potential
exercise of the Corporations’ outstanding warrants and share
purchase options. As construction of the Renard Diamond Project
progresses, this forecast is expected to change quarter to quarter
based on the timing of expenditures and receipts, volatility in the
CAD$:US$ exchange rate, and any change to the forecast cost of the
project. Capital expenditures incurred during the two-month and
eight-month periods were of $71.6 million and $289.9 million,
respectively, with capital expenditures to date of $548.5 million
having been incurred or committed against the total project
cost.
Net loss for the two and eight months ended
December 31, 2015 totalled $4.3 million and $3.7 million
respectively, and includes other income (expenses) of $(3.0)
million and $2.2 million, respectively. Net losses were impacted by
several items not reflective of Stornoway’s underlying operating
performance, including changes in the fair value of a derivative
and unrealized gains and losses from foreign exchange. Operating
expenses for the two and eight month periods totalled $1.2 million
and $5.9 million, respectively.
Construction Highlights
At year end, overall construction progress stood
at 63.3% based on man-hour estimates compared to a plan of 59.6%.
Engineering was substantially complete at 99.0% compared to a plan
of 99.9%. One loss time incident (“LTI”) was recorded with a
contractor during the quarter, for a project-to-date LTI rate of
0.6 for contractors and 0.0 for Stornoway employees.
Construction progress during and subsequent to
the quarter has focussed on the project’s major facilities
including the diamond-processing plant, natural gas power plant,
Liquid Natural Gas (“LNG”) storage area, primary crusher, processed
kimberlite load-out and water treatment plant. At the processing
plant secondary steel installation, mechanical and piping, and
electrical installation are well advanced. Major equipment
installed by the end of February included the dewatering
centrifuges, the cone and jaw crushers, the High Pressure Grinding
Roll crusher, the rotary scrubber, ore bins and the exterior
conveyors. Commissioning of the LNG storage facility, distribution
network and power plant began at the end of February.
Daily manpower at site in December averaged 384
workers with a peak of 568, of which 21% were Crees of the Eeyou
Istchee. Stornoway employees stood at 320 as at December 31,
including 246 in the on-site development team, of which 18% were
Crees, 25% were from Chibougamau and Chapais, and 57% were from
outside the region.
Mining
By year end, a total of 5,975,813 tonnes of
overburden, waste rock and ore had been extracted from the Renard
2-Renard 3 and Renard 65 open pits, compared to a plan of 5,725,429
tonnes (104%). A total of 151,591 tonnes of ore had been delivered
to the stockpile compared to a plan of 100,000 tonnes (151%).
Development of the ramp for the underground mine
stood at 887 meters on December 31 compared to a plan of 1,234
meters (72%). Progress on the ramp continued to be affected during
November and December by water inflows on a fault structure that
required extensive grouting. Progress accelerated during January,
and slowed again during February as the structure was intersected a
second time after the ramp had made its first turn at the 129 meter
level. Overall progress in the ramp stood at 1,071 meters, or 73%
of plan, at the end of February.
Updated Mine Plan and NI 43-101
Technical Report
Stornoway expects to complete an update to the
mine plan for the Renard Diamond Project shortly that will
incorporate recent changes to the project’s Mineral Resources and
its forecast schedule and cost to complete. The new plan will
contemplate extended mine production, a deepening of the Renard
2-Renard 3 open pit, the commensurate deepening of the underground
mine infrastructure and the inclusion of Indicated Mineral
Resources at Renard 65 for open pit mining. This work will include
a revised statement of project Mineral Reserves, and will be
accompanied by the filing of an updated National Instrument (“NI”)
43-101 technical report.
Exploration Update
Exploration programs are ongoing on several 100%
owned generative diamond exploration projects in Canada, including
the Adamantin Project located approximately 100 km south of the
Renard Diamond Project and 25 km west of the Route 167 Extension
road. Stornoway’s claim position at Adamantin now stands at 15,080
hectares after recent additional ground acquisition. Till sampling
during 2015 confirmed the presence of indicator mineral anomalies
interpreted to be sourced from undiscovered kimberlites with
diamond potential, with one till sample including a diamond from
the +0.25mm-0.50mm size fraction. In December 2015 Stornoway’s
board of directors approved a budget allocation of $2.5 million for
an exploratory drill program at Adamantin which was mobilized in
mid-March following the receipt of final 2015 surface sampling
results and geophysical interpretation.
Financial Summary
Consolidated
Statements of Financial Position |
|
|
(millions
of Canadian dollars) |
|
December31, 2015 |
|
April 30,2015 |
|
|
|
|
|
Cash, cash equivalents
and short-term investments |
|
209.1 |
|
363.6 |
Property, plant and
equipment |
|
831.4 |
|
541.5 |
Other assets |
|
42.7 |
|
40.0 |
Total
Assets |
|
1,083.2 |
|
945.1 |
|
|
|
|
|
Debt and convertible
debentures |
|
219.6 |
|
205.0 |
Deferred revenue |
|
207.1 |
|
101.5 |
Other liabilities |
|
80.5 |
|
61.1 |
Equity |
|
576.0 |
|
577.5 |
Total
Liabilities and Equity |
|
1,083.2 |
|
945.1 |
Key Financial and Operating Highlights
(millions
of Canadian dollars, except earnings per share) |
Two monthsendedDecember31,
2015 |
|
ThreemonthsendedJanuary
31, 2015 |
|
EightmonthsendedDecember31, 2015 |
|
Year endedApril
30,2015 |
|
|
|
|
|
|
|
|
Cash
provided (used) in operating activities |
|
(10.2 |
) |
|
|
(8.0 |
) |
|
|
98.9 |
|
|
|
79.1 |
|
Cash
provided (used) in investing activities |
|
33.7 |
|
|
|
(257.7 |
) |
|
|
(139.3 |
) |
|
|
(461.3 |
) |
Cash
provided (used) in financing activities |
|
(1.1 |
) |
|
|
─ |
|
|
|
(2.4 |
) |
|
|
434.2 |
|
Effect
of foreign exchange rate changes on cash and cash equivalents |
|
4.4 |
|
|
|
11.4 |
|
|
|
11.4 |
|
|
|
10.5 |
|
Increase (decrease) in
cash and cash equivalents |
|
26.8 |
|
|
|
(254.3 |
) |
|
|
(31.4 |
) |
|
|
62.5 |
|
|
|
|
|
|
|
|
|
Net earnings (loss) for the period |
|
(4.3 |
) |
|
|
7.7 |
|
|
|
(3.7 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
Earnings (loss) per share – basic |
|
(0.01 |
) |
|
|
0.01 |
|
|
|
Nil |
|
|
|
Nil |
|
Earnings (loss) per share – diluted |
|
(0.01 |
) |
|
|
0.01 |
|
|
|
Nil |
|
|
|
Nil |
|
The Corporation’s consolidated Financial
Statements are prepared in Canadian dollars in accordance with
International Financial Reporting Standards. Consolidated financial
statements for the truncated quarter and eight-month period ended
December 31, 2015, and Management’s Discussion and Analysis have
been posted on the Corporation’s website www.stornowaydiamonds.com
and on SEDAR at www.sedar.com.
About the Renard Diamond Project
The Renard Diamond Project 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. On July 8, 2014, Stornoway announced the
completion of a C$946 million project financing transaction to
fully fund the project to production, and construction commenced on
July 10, 2014. First ore is scheduled to be delivered to the plant
at the end of September 2016, with commercial production scheduled
for December 31, 2016.
In January 2013, Stornoway released the results
of an Optimized Feasibility Study at Renard which highlighted the
potential of the project to become a significant producer of high
value rough diamonds over a long mine life. Probable Mineral
Reserves, as defined in National Instrument 43-101 – Standards of
Disclosure for Mineral Projects (“NI 43-101”), stand at 17.9
million carats. In accordance with the Corporation’s September 2015
Mineral Resource estimate, total Indicated Mineral Resources,
inclusive of the Mineral Reserve, stand at 30.2 million carats,
with a further 13.35 million carats classified as Inferred Mineral
Resources, and 33.0 to 71.1 million carats classified as
non-resource exploration upside. Average annual diamond
production is forecast at 1.6mcarats/year over the first 11 years
of mining, at an average valuation of US$190/carat based on a March
2014 assessment by WWW International Diamond Consultants Ltd.
Readers are cautioned that the potential quality
and grade of any target for further exploration 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. All kimberlites
remain open at depth. Readers are referred to the technical report
dated February 28, 2013, in respect of the January 2013
Optimization Study, and the technical report dated January 11,
2016, in respect of the September 2015 Mineral Resource estimate,
for further details and assumptions relating to the project.
Disclosure of a scientific or technical nature in this press
release was prepared under the supervision of Patrick Godin, P.Eng.
(Québec), Chief Operating Officer and Robin Hopkins, P.Geol.
(NT/NU), Vice President, Exploration, both Qualified Persons (“QP”)
under National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“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, on track
to becoming 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
(Director, Investor Relations) 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, Stornoway’s medium and long-term goals, and
strategies to achieve those objectives and goals, as well as
statements with respect to Stornoway’s 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
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, average ore
recovery, internal dilution, mining dilution and other mining
parameters set out in the 2011 Feasibility Study or the
Optimization Study; (v) assumptions relating to gross
revenues, operating cash flow and other revenue metrics set out in
the 2011 Feasibility Study or the Optimization Study;
(vi) mine expansion potential and expected mine life;
(vii) expected time frames for completion of permitting and
regulatory approval related to construction activities at the
Renard Diamond Project; (viii) the expected time frames for
the completion of the open pit and underground mine at the Renard
Diamond Project; (ix) the expected time frames for the completion
of construction, start of mining and commercial production at the
Renard Diamond Project and the financial obligations or costs
incurred by Stornoway in connection with such mine development;
(x) future exploration plans; (xi) future market prices
for rough diamonds; (xii) the economic benefits of using
liquefied natural gas rather than diesel for power generation;
(xiii) sources of and anticipated financing requirements;
(xiv) the effectiveness, funding or availability, as the case
may require, of the Stream, the Senior Secured Loan, the COF and
the Equipment Facility and the use of proceeds therefrom;
(xv) the Corporation’s expectations regarding receipt of the
remaining deposits under the Stream and its ability to meet its
delivery obligations thereunder; (xvi) the impact of the
Financing Transactions on the Corporation’s operations,
infrastructure, opportunities, financial condition, access to
capital and overall strategy; (xvii) the foreign exchange
rate between the US dollar and the Canadian dollar; and (xviii) the
availability of excess funding for the construction and operation
of the Renard Diamond Project . 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 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) receipt of regulatory approval on
acceptable terms within commonly experienced time frames;
(iv) anticipated timelines for completion of construction,
commencement of mine production and development of an open pit and
underground mine at the Renard Diamond Project, which heavily
depends, among other things, on adequate availability and
performance of skilled labour, engineering and construction
personnel, performance of mining and construction equipment and
timely delivery of components; (v) anticipated geological
formations; (vi) market prices for rough diamonds and the
potential impact on the Renard Diamond Project; (vii) the
satisfaction or waiver of all conditions under each of the Stream,
the Senior Secured Loan, the COF and the Equipment Facility to
allow the Corporation to draw on the funding available under those
financing elements for the completion of the development and
construction of the Renard Diamond Project; (viii) Stornoway’s
interpretation of the geological drill data collected and its
potential impact on stated Mineral Resources and mine life; (ix)
future exploration plans and objectives; (x) the receipt of
the remaining deposits under the Stream and the Corporation’s
ability to meet its delivery obligations thereunder; and (xi) the
continued strength of the US dollar against the Canadian dollar.
Additional risks are described in Stornoway's most recently filed
Annual Information Form, annual and interim MD&A, and other
disclosure documents available under the Corporation’s profile at:
www.sedar.com.
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,
kimberlite lithologies and country rock content within the material
identified as Mineral Resources from that predicted;
(ii) variations in rates of recovery and 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 and operating 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) changes
in project parameters as plans continue to be refined;
(xiii) risks relating to the receipt of regulatory approval or
the implementation of the existing Impact and Benefits Agreement
with aboriginal communities; (xiv) the effects of competition
in the markets in which Stornoway operates; (xv) operational
and infrastructure risks; (xvi) execution risk relating to the
development of an operating mine at the Renard Diamond Project;
(xvii) failure to satisfy the conditions to the effectiveness,
funding or availability, as the case may require, of each of the
Stream, the Senior Secured Loan, the COF and the Equipment
Facility; (xviii) changes in the terms of the Stream, the
Senior Secured Loan, the COF or the Equipment Facility;
(xix) the funds of the Stream, the Senior Secured Loan, the
COF or the Equipment Facility not being available to the
Corporation; (xx) the Corporation being unable to meet its
delivery obligations under the Stream; (xxi) future sales or
issuance of Common Shares lowering the Common Share price and
diluting the interest of existing shareholders; and (xxi) the
additional risks described in Stornoway's most recently filed
Annual Information Form, annual and interim MD&A 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 unforeseeable, new
risks may arise from time to time.