Stornoway Diamond Corporation (TSX:SWY)
(the “Corporation” or “Stornoway”) is pleased to
provide production and sales results at the Renard Diamond Mine for
the quarter ended September 30, 2017. Highlights include:
- 442,154 carats produced from the processing of 506,381 tonnes
of ore with an attributable grade of 87 carats per hundred tonnes
(“cpht”), compared to a plan of 422,475 carats from 540,000 tonnes
at 78 cpht (+5%, -6% and +12% respectively).
- Average processing rate of 5,957 tonnes per day achieved during
the quarter.
- 438,632 carats sold in two sales (2017 sales #6 and #7) for
gross proceeds1 of C$51.6 million2, at an average price of US$94
per carat (C$118 per carat2).
Matt Manson, President & CEO commented: “The
third quarter at the Renard diamond mine saw continued robust carat
production with a 12% beat on recovered grade compared to our mine
plan. On a project to date basis our recovered grades are
reconciling well with the overall expected resource model, and
reflecting a positive geological reconciliation in the Renard
2-Renard 3 open pit. During the quarter we saw growth in carats
sold, gross sales revenue, and average pricing compared to the
first half of the year, despite a rough market correction at the
end of the quarter which served to slow the rate of increase. At
the process plant, we are achieving steady name-plate capacity in
processing, and have broken ground on our new ore/waste sorting
circuit that we expect will positively impact the quality of our
diamond production and achieved pricing at sale. Third quarter
financial results, including operating costs and earnings, will be
released after market on Thursday, November 2, 2017.”
Diamond ProductionDuring the
quarter, 506,380 tonnes of ore were processed compared to the plan
of 540,000 tonnes (-6%). However, better than expected ore grades
in the Renard 2-Renard 3 open pit led to higher diamond production
than planned, with 442,154 carats produced at 87 cpht compared to
422,475 carats at 78 cpht (+5% and +12% respectively).
From the beginning of ore processing at the
Renard Mine in July 2016 to September 30, 2017, 1.83 million tonnes
of ore have been delivered to the process plant resulting in the
production of 1.69 million carats of diamonds at 92 cpht. This
compares favourably with the March 2016 mine plan of 1.68 million
tonnes and 1.50 million carats at 89 cpht (+10%, +13% and +4%
respectively).
The average processing rate of the plant during
the third quarter was 5,957 tonnes per day, excluding a 7 day
scheduled annual maintenance shutdown in July. The nameplate
capacity of the plant is 6,000 tonnes per day at 78%
utilization.
Diamond Sales and Market
CommentaryTwo tender sales were completed during the
quarter. In total, 438,632 carats were sold for gross proceeds1 of
C$51.6 million2, at an average price of US$94 per carat (C$118 per
carat2). This compares to an average price of US$81 achieved in the
first quarter and US$87 per carat in the second quarter (Table
1).
Table (1) Sales Data FY2017
(figures presented on a run-of-mine basis) |
Three months ended March 31,
20173 |
Three months ended June 30,
2017 |
Three months ended September 30,
20174 |
Number of Sales5 |
3 |
2 |
2 |
Carats Sold |
406,446 |
350,159 |
438,632 |
Gross Proceeds (C$M)2 |
43.8 |
40.9 |
51.6 |
Average Price per Carat (US$/ct) |
81 |
87 |
94 |
Average Price per Carat (C$/ct) |
108 |
117 |
118 |
|
|
|
|
At the beginning of third quarter Stornoway
completed its 6th sale of the year, with 151,135 carats sold at an
average price of US$101 per carat (C$128 per carat6). Following the
traditional summer recess for the rough diamond market in August,
Stornoway completed its 7th and largest sale to date, with 287,4976
carats sold at an average price of US$90 per carat (C$112 per
carat7). During this period the rough diamond market experienced a
price correction after several months of gains, estimated at
between 6% and 8% on an average weighted basis. This is reflected
in the prices achieved in Stornoway’s tender sales at the beginning
and end of the quarter.
The average pricing achieved in the Renard
diamond tender sales is impacted by, amongst other things, the
proportion of small diamonds in the sales mix, market factors, and
the ongoing issues of diamond breakage in the process plant, which
reduces the proportion of larger diamonds available for sale and
influences the average quality assortment. Despite the steady
increase in pricing achieved during the course of the year on a
quarter by quarter basis, it is likely that the annual average
price for the fiscal year ending December 31, 2017 will fall below
Stornoway’s 2017 pricing guidance of US$100 to US$132 per carat
given the outlook for the rough diamond market for the remainder of
the year. Stornoway will hold two further tender sales in the
fourth quarter.
Processing UpdateSince ore
processing at Renard began, the project has experienced high levels
of diamond breakage. This is manifested most directly in the
proportion of larger diamonds recovered, and in the average quality
profile. Both factors negatively impact the achieved average
diamond price at sale.
The source of the breakage has been localized
primarily in the secondary cone crusher and tertiary high pressure
grinding rolls crusher, and appears associated with the high
proportion of hard, internal dilution inherent in Renard ore. In
early August the Stornoway board of directors approved an
extraordinary capital budget of $22 million for a program of plant
improvements aimed at improving the quality profile of the Renard
production, to be funded from existing financial resources. At the
center of this plan is the introduction of an ore/waste sorting
circuit, rated at 7,000 tonnes per day and expandable, designed to
extract waste rock in the +30mm-200mm size range immediately prior
to its introduction to the secondary cone crusher. The ore/waste
sorting circuit will include covered conveyors, a gravity fed tower
containing primary, secondary and scavenging spectral sorters, and
a waste rock load out. Work on the concrete foundations began in
August, and all steel work and enclosures are scheduled to be
completed by year end. Commissioning is scheduled for the first
quarter of 2018. In addition to an improved diamond size and
quality profile, the addition of this circuit is expected to have
the ancillary benefit of reducing load on the rest of the Renard
process plant, allowing for future potential plant expansion.
About the Renard Diamond
MineThe 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.
About Stornoway Diamond
CorporationStornoway 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 Mine, 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 Officer
For more information, please contact Matt Manson
(President and CEO) at 416-304-1026 x2101or Orin Baranowsky (CFO)
at 416-304-1026 x2103 or Jodi Hackett (Manager, Communications) at
416-304-1026 x2104 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 document contains forward-looking
information (as defined in National Instrument 51 102 – Continuous
Disclosure Obligations) and forward-looking statements within the
meaning of Canadian securities legislation and the United States
Private Securities Litigation Reform Act of 1995 (collectively
referred to herein as “forward-looking information” or
“forward-looking statements”). These forward-looking statements are
made as of the date of this document 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 relate to
future events or future performance and 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 management’s beliefs, plans, objectives, expectations,
estimates, intentions and future outlook and anticipated events or
results. Although management considers these
assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect.
Forward-looking statements made in this document
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, cost of
sales, cash cost of production, gross margins estimates, planned
and projected capital expenditure, liquidity and working capital
requirements; (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 levels of 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’s, most recently filed AIF,
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, and (xxi) the additional risk factors described herein and in
Stornoway’s annual and interim MD&A’s, most recently filed AIF,
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.
1 Before stream and royalty.2 Based on an average C$: US$
conversion rate of $1.2520.3 Excludes 52,681 carats of smaller and
lower quality goods carried over from Stornoway’s first sale in
November 2016.4 Includes 32,989 carats sold during the third
quarter’s last tender sale, but for which revenues will be realized
in the fourth quarter.5 In the first quarter, four out of tender
sales were concluded in addition to the three regular tender
sales.6 Based on an average C$: US$ conversion rate of $1.2627.7
Based on an average C$: US$ conversion rate of $1.2456.