Stornoway Diamond Corporation (TSX:SWY)
(the “Corporation” or “Stornoway”) announced today
its results for the quarter ended March 31, 2016.
Quarter ended March 31, 2016
Highlights
(All quoted figures in CAD$)
- Progress at the Renard Diamond Project continues in line with
the planned schedule and budget.
- Incurred costs and commitments at quarter-end totalled $615.3
million, or 79% of budget.
- Construction progress stood at 83.4% compared to the
(re-baselined) plan of 77.6% at the end of the quarter, and at
92.1% compared to 84.1% at the end of April.
- On site manpower during the month of March averaged 522
workers, of which 14.8% were Crees of the Eeyou Istchee.
- Mining in the Renard 2-3 and Renard 65 open pits stood at
7,504,923 tonnes, or 102% of plan, with 194,416 tonnes of ore
stockpiled. Underground mine development stood at 1,218 meters, or
74% of plan.
- During the quarter the project’s liquefied natural gas (“LNG”)
power plant was completed and fully commissioned and all principal
crushing and diamond recovery equipment for the process plant was
received and installed. At quarter-end project construction was
focused on mechanical, piping, electrical and instrumentation
installation in the process plant, primary crusher, water treatment
facility and processed kimberlite load-out.
- For the three-month period ended March 31, 2016, the
Corporation reported a net loss of $22.6 million or $0.03 per share
basic and $0.03 per share fully diluted.
- Cash, cash equivalents and short-term investments stood at
$219.1 million. On March 30 the drawdown of the third and final
US$90m tranche of diamond stream funding from Orion Mine Finance,
Caisse de dépôt et placement du Québec and Blackstone Tactical
Opportunities occurred as planned. Excess financing capacity
available to complete the project, comprising surplus cash and
available cost-overrun facilities, is now forecast to be $116
million, assuming the satisfaction of all covenants and conditions
precedent relating to future funding commitments and a CAD$:US$
conversion rate of $1.25.
Matt Manson, President and CEO, commented:
“Construction at Renard during, and subsequent to, the first
quarter has continued to exceeded expectations. Progress in March
and April alone was an impressive 9.4% and 8.7% respectively. This
puts us well within the already re-baselined schedule for first ore
processing by the end of September. With final equipping of the
process plant proceeding well, our critical path activity has
become mining and the supply of ore on a schedule commensurate with
the earlier than expected plant availability. To this end, our open
pit mining is tracking to plan and challenges in the development of
the ramp in December and February appear now to have been overcome.
With market reports indicating a strengthening in rough diamond
prices and our project execution continuing well, our outlook
for project completion and first diamond production later this year
is positive.”
Financial Summary
Stornoway ended the quarter with cash, cash
equivalents and short-term investments of $219.1 million, compared
with $209.1 million at the end of the previous quarter. The third
and final tranche of payment deposits under Stornoway’s streaming
agreement with Orion Mine Finance, the Caisse de dépôt et placement
du Québec and Blackstone Tactical Opportunities was received on
March 30, 2016. Stornoway now expects to draw on its $100 million
senior secured loan from Investissement Québec 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 $116 million,
comprised of $68 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 $1.25 for retained US dollar funds. 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 quarter were of $100.5 million, with capital
expenditures to date of $615.3 million having been incurred or
committed against the total project cost.
Net loss for the three months ended March 31,
2016 totalled $22.6 million, or $0.03 per share basic and $0.03 per
share fully diluted, and includes other income (expenses) of
$(19.6) 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 month period totalled $3.0 million.
Construction Highlights
As at March 31, 2016, overall construction
progress stood at 83.4% based on man-hour estimates compared to the
re-baselined plan of 77.6% (and the initial plan of 72.7%).
Engineering is now completed at 100%. By the end of April,
construction progress had advanced further to 92.1%, compared to
the re-baselined plan of 84.1% (and the initial plan of 77.3%). One
loss time incident (“LTI”) was recorded during the quarter, for a
project-to-date LTI rate of 1.5 for contractors and 0.3 for
Stornoway employees.
During the quarter the project’s LNG fueled
power plant was completed and commissioned. Power requirements on
site are now being fully met by low-carbon natural gas, making the
Renard Project the first such mine in Canada. Temporary diesel
gensets have been placed on standby.
During and subsequent to the quarter, principal
equipment at the diamond processing plant, such as crushers, high
pressure grinding rolls, rotary scrubber, dense media separation
cyclones, X-ray recovery modules, TOMRA XRT large diamond recovery
module, ore bins and conveyors had been successfully delivered and
installed. Ongoing construction at the process plant, the primary
crusher and the processed kimberlite load out, is now focussed on
piping, mechanical, electrical and instrumentation installation
ahead of anticipated pre-operational verification during the second
and third quarters.
Daily manpower at site in March averaged 522
workers with a peak of 576, of which 14.8% were Crees of the Eeyou
Istchee. Stornoway employees stood at 381 as at March 31, including
307 with the on-site development team, of which 17% were Crees, 22%
were from Chibougamau and Chapais, and 61% were from outside the
region.
Mining
As at March 31, 2016, a total of 7,504,923
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 7,376,351 tonnes (102%). A total of 194,416 tonnes of ore have
been delivered to the stockpile compared to a plan of 207,799
tonnes (94%).
Development of the ramp for the underground mine
stood at 1,218 meters on March 31 compared to a plan of 1,643
meters (74%). Progress on the ramp during the first part of the
quarter continued to be affected by water inflow on a fault
structure that required extensive grouting. The structure was first
intersected in November and December, and then again in February as
the ramp made its first turn. Progress since the middle of March
has met or exceeded plan after the structure was successfully
circumvented.
Exploration Update
Exploration programs are ongoing on generative
diamond exploration projects in Canada, which are 100% owned by the
Corporation, including the Adamantin Project located approximately
100 km south of the Renard Diamond Project and 25 km west of the
Route 167 Extension road. Till sampling during 2015 at Adamantin
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. On May 5, 2016 Stornoway announced that kimberlite
had been intersected in 18 of 78 drill holes (including 7 lost
holes) testing 72 geophysical targets. These intersections are
interpreted to represent at least 11 discrete kimberlite bodies. Of
the 18 kimberlite intersections, 14 returned intersections of
undiluted (100%) hypabyssal kimberlite chips between 1.5m and 13.7m
in length. Intersections of mixed chips of kimberlite and country
rock were also returned up to 22.9m in length. Of note,
drilling at adjacent geophysical anomalies AD-50, 51 and 52
suggests the presence of a single, shallowly dipping (5-10
degrees), tabular body with an apparent true thickness of
approximately 10 meters. This body lies 6-12m below surface,
extends over a minimum strike extent of 260 meters and is open in
all directions. Samples recovered from AD-50/51/52 and the other
new kimberlite bodies have been sent for diamond recovery.
Stornoway’s claim position at Adamantin now stands at 15,139
hectares after recent additional ground acquisition.
Financial Summary
Consolidated
Statements of Financial Position |
|
|
(millions
of Canadian dollars) |
|
March 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
Cash, cash equivalents
and short-term investments |
|
219.1 |
|
209.1 |
Property, plant and
equipment |
|
934.0 |
|
831.4 |
Other assets |
|
50.7 |
|
42.7 |
Total
Assets |
|
1,203.8 |
|
1,083.2 |
|
|
|
|
|
Debt and convertible
debentures |
|
245.8 |
|
219.6 |
Deferred revenue |
|
323.4 |
|
207.1 |
Other liabilities |
|
80.3 |
|
80.5 |
Equity |
|
554.3 |
|
576.0 |
Total
Liabilities and Equity |
|
1,203.8 |
|
1,083.2 |
|
|
|
|
|
Key Financial and Operating Highlights
(millions
of Canadian dollars, except earnings per share) |
|
Three months endedMarch 31,
2016 |
|
Three months endedApril
30, 2015 |
|
|
|
|
|
Cash
provided in operating activities |
|
|
108.9 |
|
|
|
102.0 |
|
Cash
used in investing activities |
|
|
(62.2 |
) |
|
|
(136.8 |
) |
Cash
used in financing activities |
|
|
(0.5 |
) |
|
|
(1.2 |
) |
Effect
of foreign exchange rate changes on cash and cash equivalents |
|
|
(2.8 |
) |
|
|
(8.2 |
) |
Increase (decrease) in
cash and cash equivalents |
|
|
43.4 |
|
|
|
(44.2 |
) |
|
|
|
|
|
Net loss for the period |
|
|
(22.6 |
) |
|
|
(8.5 |
) |
|
|
|
|
|
Loss per share – basic and diluted |
|
|
(0.03 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
The Corporation’s consolidated Financial
Statements are prepared in Canadian dollars in accordance with
International Financial Reporting Standards. Condensed Interim
Consolidated Financial Statements for the quarter ended March 31,
2016, and Management’s Discussion and Analysis have been posted on
the Corporation’s website www.stornowaydiamonds.com and on SEDAR at
www.sedar.com.
Annual General Meeting
Stornoway will host the Corporation's Annual
General Meeting of shareholders on Monday May 16, 2016 at 4:00 pm
at the Sofitel Montreal Golden Mile Hotel. Upon the conclusion of
the official business of the meeting, a presentation on the
Corporation and construction progress at the Renard Diamond Project
will be given by Matt Manson, President and CEO, and Patrick Godin,
COO. For the benefit of shareholders not able to be present in
Montreal, this presentation will be webcast at;
http://www.stornowaydiamonds.com/English/investors/events/default.aspx.
The webcast is anticipated to begin at
approximately 4:30 pm. An archived version of the webcast
will be made available on the Stornoway website following the
Annual General Meeting.
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 $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, with an Updated Mine
Plan and Mineral Reserve Estimate in March 2016. These studies
highlight the potential of the project to become a significant
producer of high value rough diamonds over an initial 14 year mine
life. Probable Mineral Reserves, as defined in National Instrument
43-101 – Standards of Disclosure for Mineral Projects (“NI
43-101”), stand at 22.3 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 1.8 million carats per
annum over the first 10 years of mining, at an average valuation of
US$155/carat based on March 2016 terms.
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, 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.
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 (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, 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
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, average ore
recovery, internal dilution, mining dilution and other mining
parameters set out in the Updated Renard Diamond Project Mine Plan
and Mineral Reserve Estimate, Québec, Canada, NI 43-101 Technical
Report (the “2016 Technical Report”) ; (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 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 ability to
meet its Subject Diamonds Interest delivery obligations under the
Purchase and Sale Agreement; and (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 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 Corporation’s ability to meet
its delivery obligations under the Steaming Agreement; 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.