Stornoway Reports FY2018 First Quarter Financial Results

LONGUEUIL, Quebec, May 15, 2018 — Stornoway Diamond Corporation (TSX:SWY); (the “Corporation” or “Stornoway”) is pleased to report financial and operating results for the quarter ended March 31, 2018.

Revenues and financing expenses quoted herein reflect the initial application of IFRS 15, Revenue from Contracts with Customers, effective as of January 1, 2018. During the quarter, the Corporation also adopted IFRS 9, Financial Instruments. See “New Accounting Standards Adopted” below.

QUARTER ENDED MARCH 31, 2018 HIGHLIGHTS:

(All quoted figures in CAD$, unless otherwise noted)

• For the three months ended March 31, 2018, Stornoway reported net loss of $11.0 million ($0.01 per share on a basic and fully diluted basis), compared to net loss of $1.2 million for the three months ended March 31, 2017 ($Nil per share basic and $0.01 fully diluted). Adjusted net loss¹ for the quarter was $14.0 million and $2.5 million in the corresponding period of 2017.
• During the quarter, three tender sales totalling 399,135 carats were completed for gross proceeds of $56.6 million at an average price of US$112 per carat ($142 per carat²). Revenue recognized was $55.9 million derived from the sale of 271,518 carats of run of mine production in two tender sales at an average price of US$106 per carat ($135 per carat²), and the sale of 42,663 carats of incidental production in one out of tender contract sale at an average price of US$19 per carat ($24 per carat³). Revenue from the third tender sale of the year, which comprised 127,616 carats of run of mine production sold at an average price of US$123 per carat ($156 per carat⁴), will be recognised in the second quarter.
• During the quarter, a 37 carat Type II-a, D colour, internally flawless stone was recovered and sold in the third tender sale for $1.7 million ($45,000 per carat⁴), or US$1.3 million (US$36,000 per carat), the highest price achieved for an individual stone from the Renard mine to date.
• Diamond processing comprised 285,851 carats recovered from 562,520 tonnes of ore at a grade of 51 carats per hundred tonnes (“cpht”). Grade and carat recoveries reflect the processing of lower grade production ore and ore stockpiles as the Renard mine transitions from open pit to underground mining. In response, full year production guidance has been reduced to between 1.35 and 1.40 million carats from 1.6 million carats, while full year guidance for carats sold has been reduced to between 1.20 and 1.25 million carats from 1.6 million carats.
• Mining in the Renard 2-3 and Renard 65 open pits comprised 424,923 tonnes, with 202,986 tonnes of ore extracted. By the end of the quarter, mining in the Renard 2 open pit had been completed, and a progressively higher proportion of ore was being derived from the Renard 2 underground mine. Underground mining during the quarter comprised 168,906 tonnes, with 116,798 tonnes of ore extracted.
• Commissioning of the new ore-waste sorting circuit at Renard began on schedule prior to the end of the quarter. Equipment commissioning commenced on March 25, 2018, with ore processing achieved on a consistent basis by the end of April. The volume and quality of ore-waste segregation has been positive, and initial diamond recovery results have been encouraging.
• Cash operating costs per tonne processed¹ were $50.70 per tonne ($99.77 per carat) and capital expenditures¹ were $31.1 million.
• For the first quarter, the Corporation reported adjusted EBITDA¹ of $7.4 million, or 19% of adjusted revenues¹, compared to $21.3 million, or 44% of revenues, for the corresponding quarter of 2017.
• At quarter-end, cash, cash equivalents and short-term investments stood at $51.6 million and available liquidity¹ to the Corporation, including available credit facilities, stood at $71.9 million.

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¹ See “Non-IFRS Financial Measures” section
² Based on an average $:US$ conversion rate of $1.27
³ Based on an average $:US$ conversion rate of $1.29
⁴ Based on an average $:US$ conversion rate of $1.26

Matt Manson, President and CEO, commented: “Our first quarter results reflect the transitional nature of our business, as we move from open pit to underground mining. During this transition, carat production is being negatively impacted by the processing of the lower grade ore currently available to us in our stockpiles and in the first underground stopes. This has prompted us to reduce our full year production and sales guidance. At the same time, however, we have been encouraged by strong pricing in the diamond market, with first quarter prices trending well ahead of those achieved in 2017, and our operating and capital expenditures are within plan. We are also encouraged by the progress of our underground mining and the initial results from our ore-waste sorting, which is giving some very early indications of improved diamond recoveries and exceeding our expectations in terms of the volume and quality of the material sorted.” Matt Manson continued: “By the end of the second quarter the Renard Mine will have fully transitioned to underground mining supported by ore sorting, and major capital expenditures will be behind us. This will be the character of our business going forward, with growing production driven by increasing grade and excess processing capacity. All of this has been achieved with the capital structure and financial liquidity established in our original 2014 construction funding. As we move forward, we are in discussions with our lenders to amend the terms of certain debt instruments to better suit our working capital requirements as an operator and in support of the further growth of the business.”

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