Stornoway Diamond Corporation (TSX:SWY)
(the "Corporation" or "Stornoway") announced today
its first quarter results for the three months ended July 31, 2015.
First Quarter FY2016 Highlights
(All quoted figures in CAD$)
- Construction at the Renard Diamond Project continues in line
with the planned schedule and budget.
- Incurred costs and commitments at the quarter-end totaled
$402.6 million, or 50% of budget.
- Overall construction progress stood at 35% compared to a
planned 33%. Engineering progress stood at 80% compared to a
planned 87%.
- On site manpower during the month of July averaged 329 workers,
of which 24% were Crees of the Eeyou Istchee.
- At the end of the quarter principal construction on the process
plant, power plant, maintenance facility and primary crusher had
been initiated and were well advanced. Completion of the
maintenance facility and enclosure of the process plant are
expected to be completed by the end of September and October
respectively, well within the planned schedule.
- During the quarter, the Corporation reported a net loss of $9.7
million or $0.01 per share ($0.01 per share fully diluted).
- Cash, cash equivalents and short-term investments stood at
$270.1 million[1]. Excess financing capacity available to complete
the project, comprising surplus cash and available cost-overrun
facilities, is now forecast to be $101 million, assuming the
satisfaction of all covenants and conditions precedent relating to
future funding commitments and a CAD$:US$ conversion rate of
$1.25.
Matt Manson, President and CEO, commented "During the latest
quarter we continued to make excellent progress on the construction
of the Renard Project, and are maintaining our forecast of
completion within budget and schedule. Construction progress
continues to track ahead of plan, principal engineering is nearing
completion, and all major facilities are on track to be enclosed
and heated prior to the onset of cold weather conditions. In
addition, we continue to see an increase in the forecast amount of
excess funding capacity available to complete the project given our
undrawn cost overrun facilities and the impact of the depreciating
Canadian dollar on the value of our current and committed US dollar
funds. This foreign exchange effect continues to influence our
financial results, through a fair value calculation on a portion of
our carried debt and, more importantly, offers the potential for an
increasingly robust cash position as we look to the project's
commissioning and ramp-up period beginning late next year."
Financial Summary
Stornoway ended the quarter with cash, cash equivalents and
short-term investments of $270.1 million, compared with $363.6
million at the end of the previous quarter. Stornoway's current
cash resources are sufficient to cover planned mine development
expenses, financing and corporate costs during calendar 2015. The
second and third payment deposits under the stream agreement of
US$80 and US$90 million are expected to be received in September
2015 and March 2016 respectively, following which Stornoway expects
to draw on a $100 million senior secured loan in late 2016 to
complete mine development.
Assuming the full utilization of the senior secured loan, the
Corporation forecasts excess funding capacity of $101 million
comprised of $53 million of cash, receivables and expected mine tax
credits and $48 million of undrawn cost overrun facilities. This
forecast assumes a project cost of $811 million (which includes
assumed levels of escalation and contingencies), the satisfaction
of all covenants and conditions precedent for future funding, and a
CAD$:US$ exchange rate of $1.25 for unfunded US dollar denominated
financing commitments. As construction of the Renard Diamond
Project progresses, this forecast is expected to change quarter to
quarter based on the timing of expenditures and receipts,
volatility in the CAD$:US$ exchange rate, and any change to the
forecast cost of the project. Capital expenditures incurred during
the quarter were $96.0 million, with capital expenditures to date
of $402.6 million having been committed against the total project
cost.
Net loss for the three months ended July 31, 2015 decreased by
$1.8 million to $9.7 million compared to a loss of $11.5 million in
the previous year, and includes other income (expenses) of $7.3
million. 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 three months
ended July, 2015 totaled $2.4 million.
Construction Highlights
At quarter end, overall construction progress stood at 35% based
on man-hour estimates compared to a planned 33%. Calendar 2015
construction activities represent approximately 36% of the total
execution plan, with 46% of the work scheduled for 2016 and 3% for
2017. On July 31, engineering progress stood at 80% compared to a
planned 87%. Engineering relating to the project's major facilities
is expected to be substantially complete by the end of September as
planned. No loss time incidents ("LTIs") were recorded during the
quarter. One restricted work injury incurred by a contractor in the
prior quarter has been reclassified subsequently as an LTI, for a
project-to-date LTI rate of 0.9 for contractors and 0.0 for
Stornoway employees.
Construction of the project's process plant, maintenance
facility, power plant and primary crusher are well advanced. The
maintenance facility is expected to be substantially complete and
operational on September 30, allowing the maintenance of the major
equipment currently being utilized in the mining activities to
relocate from temporary facilities approximately 6 months earlier
than was planned. The concrete pour for the natural gas fueled
power plant began on May 11 and structural steel erection began on
August 6. All seven planned 2.055 MW Caterpillar LNG generators
were delivered to the site by August 21. Completion of the power
plant is now scheduled for March 2016, allowing the transition of
on-site power supply from temporary diesel gen-sets to occur
several months earlier than expected.
Construction of the 2.2 million tonne per annum process plant
represents the project's critical path activity. The project's
overall construction schedule requires the plant building to be
completed and heated by the fourth quarter of calendar 2015,
allowing the installation of the temperature sensitive crushing and
recovery circuits through the first half of calendar 2016. The
concrete foundations were completed on June 17, structural steel
erection commenced on June 15, and the building is expected to be
fully enclosed and heated by October 30, allowing interior fitting
to commence well ahead of plan. The plant is scheduled to be
energized in the second half of calendar 2016 with wet
commissioning beginning in the fourth quarter of that year. An 8
month commissioning ramp-up is planned, with a view to commercial
production being achieved in the second quarter of calendar 2017
and full production by the summer of 2017. The project remains on
schedule to achieve these milestones.
Daily manpower at site in July averaged 329 workers, of which
24% were Crees of the Eeyou Istchee. Stornoway employees, at site
and in the development team, stood at 274 on July 31, of which 18%
were Crees, 22% were from Chibougamau and Chapais, and 60% were
from outside the region.
Mining
By quarter end, a total of 3,267,903 tonnes of overburden and
waste rock had been extracted from the Renard 2-Renard 3 and Renard
65 open pits, compared to a budget of 3,724,211, or 88% of plan.
Since April, mining activities have focused on the Renard 2-Renard
3 pit with the Renard 65 pit serving as a sump for surface water
collection. The open pit mining team are now maintaining a
consistent production rate of more than 500,000 tonnes per month
(542,593 tonnes in July), with the new mining fleet performing
well. Open pit mining of Renard 2 and Renard 3 during the
construction phase of the project is expected to result in the
availability of a 700,000 tonne ore stockpile by the time plant
commissioning begins in late 2016. The project remains on schedule
to achieve this target.
Development of the ramp for the underground mine accelerated
during the quarter and stood at 486 meters on July 31 compared to a
budget of 504 meters, or 96% of plan. Delays experienced during
March and April due to cold weather and difficult initial ground
conditions have now been essentially made-up, with development
during July achieving a rate of 122% of plan (164 meters compared
to a budget of 135 meters).
Renard Resource Update
During 2014, a resource expansion drill program was completed on
the Renard 2 kimberlite with a view to convert Inferred Mineral
Resources below the base of the current Indicated Mineral Resource
at 600 meters depth and the exploration of additional kimberlite to
depth. In total, 12,145 meters of deep directional drilling was
completed, with the deepest kimberlite intersection being at 1,012
vertical metres below surface. A revised Mineral Resource estimate
for the Renard Project incorporating the results of this work, and
including updated Mineral Resource estimates for the Renard 3 and 4
kimberlites and a revised estimate of the further exploration
potential of Renard kimberlites 1, 2, 3, 4, 7 and 10, is under
final preparation and will be announced shortly.
Exploration Update
Stornoway retains an ownership interest in two diamond
exploration projects operated by North Arrow Minerals Inc. ("North
Arrow"). During 2014, North Arrow collected a sample of
approximately 1,500 tonnes at the Qilalugaq Project in Nunavut with
a view to the recovery of a diamond parcel for valuation purposes.
On June 9, 2015 North Arrow announced that a 384 carat diamond
parcel had been estimated by WWW International Diamond Consultants
to have an average price of US$36 per carat, with a range of
modeled values between a "possible low" of US$43 per carat and a
"possible high" of US$92 per carat. With the completion of this
work program North Arrow satisfied its earn-in obligations to the
Qilalugaq Project under the terms of its 2013 option agreement with
Stornoway. On July 20, Stornoway informed North Arrow that it would
not be exercising its back-in right to the project, resulting in an
80-per-cent (North Arrow)/20- per-cent (Stornoway) joint venture
arrangement being formed. At this time, North Arrow has not
informed Stornoway of any potential future work programs at
Qilalugaq.
Exploration is also being conducted with North Arrow at the
Pikoo Project in northern Saskatchewan. Kimberlites were first
discovered at Pikoo in 2013 including the PK150 kimberlite which
showed encouraging early microdiamond counts. At time of writing,
seven kimberlites have been drill confirmed and microdiamond
results from the PK314 kimberlite discovered during the winter 2015
drill program remain outstanding. Exploration of the Pikoo Project
is being conducted under an 80% (North Arrow) / 20% (Stornoway)
participating joint venture arrangement.
Summer exploration programs are ongoing on several 100% owned
generative diamond exploration projects in Canada with an overall
budget for the current fiscal year of $1 million. This work
currently includes till sampling, prospecting and claim
acquisition. Further details on individual exploration programs
will follow should results warrant the commencement of ground
geophysics and drilling. Financial Summary
Consolidated Statements of Financial
Position |
|
|
(millions of Canadian dollars) |
July 31, 2015 |
April 30, 2015 |
|
|
|
|
|
|
Cash, cash equivalents and short-term
investments |
270.1 |
363.6 |
Property, plant and equipment |
637.0 |
541.5 |
Other assets |
39.9 |
40.0 |
Total Assets |
947.0 |
945.1 |
|
|
|
Debt and convertible debentures |
224.3 |
208.0 |
Deferred revenue |
101.5 |
101.5 |
Other liabilities |
52.0 |
58.1 |
Equity |
569.2 |
577.5 |
Total Liabilities
and Equity |
947.0 |
945.1 |
|
|
|
Key Financial and
Operating Highlights |
(millions of Canadian dollars, except
earnings (loss) per share and common shares outstanding) |
Three Months
Ended |
|
|
|
July 31, 2015 |
July 31, 2014 |
|
|
|
Cash provided by (used in) operating
activities |
(3440) |
(1438) |
Cash used in investing activities |
(692) |
(25761) |
Cash provided from (used in) financing
activities |
(387) |
436,934 |
Effect of foreign exchange rate changes on
cash and cash equivalents |
6,649 |
1,536 |
Net increase (decrease) in cash and cash
equivalent |
2,130 |
411,271 |
|
|
|
Net loss for the period |
(9708) |
(11515) |
Net loss per share – basic and diluted |
(0.01) |
(0.04) |
Weighted Average Number of Common Shares
issued and outstanding (basic and diluted) |
732,310,440 |
314,788,253 |
The Corporation's consolidated Financial Statements are prepared
in Canadian dollars in accordance with International Financial
Reporting Standards. Unaudited consolidated financial statements
for the quarter ended July 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 8th, 2014
Stornoway announced the completion of a $946 million[2] project
financing transaction to fully fund the project to production, and
construction commenced on July 10th, 2014. First ore is scheduled
to be delivered to the plant in the second half of 2016 with
commercial production scheduled for the 2nd quarter of 2017.
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. Total
Indicated Mineral Resources, inclusive of the Mineral Reserve,
stand at 27.1 million carats, with a further 16.85 million carats
classified as Inferred Mineral Resources, and 25.7 to 47.8 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$190/carat
based on a March 2014 assessment by WWW International Diamond
Consultants Ltd.
Readers are cautioned that the potential quality and grade of
any target for further exploration is conceptual in nature, there
has been insufficient exploration to define a Mineral Resource and
it is uncertain if further exploration will result in the target
being delineated as a Mineral Resource. All kimberlites remain open
at depth. Readers are referred to the technical report dated
February 28th, 2013 in respect of the January 2013 Optimization
Study, and the press release dated July 23, 2013 in respect of the
July 2013 Mineral Resource estimate, for further details and
assumptions relating to the project. Disclosure of a scientific or
technical nature in this press release was prepared under the
supervision of Patrick Godin, P.Eng. (Québec), Chief Operating
Officer and Robin Hopkins, P.Geol. (NT/NU), Vice President,
Exploration, both "qualified persons" under NI 43-101. [1] Assuming
C$: US$ conversion rate of $1.3047
[2] For illustrative purposes. Assumes a C$: US$ conversion rate
of $1.10. Actual proceeds of each financing tranche are measured at
the C$: US$ exchange rate in effect the date the funds are
received.
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 Board
STORNOWAY DIAMOND CORPORATION /s/ "Matt Manson" Matt Manson
President and Chief Executive
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 approvals 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 approvals 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
depend, 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 approvals
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
issuances 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 new, unforeseeable
risks may arise from time to time.
CONTACT: For more information, please contact Matt Manson (President and CEO) at 416-304-1026 x2101
or 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-president Affaires publiques de Stornoway au 418-254-6550,
gpoirier@stornowaydiamonds.com
** Website: www.stornowaydiamonds.com Email: info@stornowaydiamonds.com **