Stornoway Reports Second Quarter 2018 Production And Sales Results
LONGUEUIL, Quebec, July 06, 2018 — Stornoway Diamond Corporation (TSX:SWY) (the “Corporation” or “Stornoway”) is pleased to provide production and sales results at the Renard Diamond Mine for the second quarter ended June 30, 2018. Highlights are as follows:
(All quoted figures in CAD$ unless otherwise noted)
- 201,283 carats sold in two tender sales for gross proceeds1 of $28.6 million2 at an average price of US$109 per carat ($142 per carat2).
- Second quarter diamond production was 223,351 carats produced from the processing of 562,060 tonnes of ore at an average grade of 40 carats per hundred tonnes (“cpht”). Grade and carat recoveries during the quarter reflect the processing of lower grade production ore and ore stockpiles as the Renard Mine transitions from open pit to underground mining.
- Mining in the Renard 3 open pit concluded in April. Ramp up of the underground mine production progressed steadily during the quarter, with mined underground tonnes averaging 3,864 tonnes per day (“tpd”) in June.
- Commissioning of the ore sorting plant, which commenced in March, was completed during the quarter and is now fully operational. Waste rejected represents between 15% and 30% of material sorted, with 1-2% kimberlite content in the reject stream. Diamonds recovered since sorting commenced exhibit low levels of breakage.
Matt Manson, President and CEO of Stornoway commented “Our second quarter production and sales report reflects the ongoing transition from open pit to underground mining and the introduction of ore-waste sorting. By the end of the quarter this transition was essentially complete, albeit with a slower than expected underground ramp-up because of lengthening lead times on mobile mining equipment. We have been particularly encouraged by the performance of the new ore sorting plant. Initial diamond results are encouraging, and given the volume and quality of the waste that is being rejected we see the potential for processing capacity in our plant beyond its current name-plate rating. Exploiting this potential new capacity will involve the development of a modified mine plan to support the accelerated mining required, and permitting.” Matt Manson continued: “The end of the second quarter also marks the end of the principal construction capital spending at Renard. The second half of the year is expected to see lower capital spending, higher processing rates and higher grades and carat recoveries. We are also seeing the rough diamond market continue to strengthen on the basis of strong market fundamentals and consumer demand. On this basis, we are engaged with our lenders on the modification of certain debt instruments to better suit the working capital requirements of the business over the longer term. These discussions are ongoing and progressing well.”
Second Quarter Diamond Sales Results
The second quarter sales of 201,283 carats represented run-of-mine production recovered between February and March 2018. Gross proceeds1 were $28.6 million2 at an average price of US$109 per carat ($142 per carat2). On a segmented basis, 147,008 carats of +7 DTC sieve size diamonds were sold at an average price of US$142 per carat ($185 per carat2), and 54,275 carats of -7 DTC sieve size diamonds were sold at an average price of US$20 per carat ($26 per carat2). These results exclude sales from the third tender sale of the first quarter, being 127,616 carats sold at an average price of US$123 per carat ($156 per carat3), which were recorded as revenues in the second quarter, as deliveries to clients were made at the beginning of the second quarter.
In addition to the sale of run of mine production, an additional 41,979 carats of diamonds smaller than the -7 DTC sieve size were sold in an out of tender contract sale for gross proceeds1 of $1.0 million4 at an average price of US$18.50 per carat ($25 per carat4). These represent recoveries of small diamond “incidentals” produced between March and May 2018 that are in excess of that expected from the Renard Mineral Resource. The sale of such incidentals represents incremental revenue above that provided for in Stornoway’s FY2018 segmented sales guidance.
Second Quarter Production Results
Second quarter production was 223,351 carats recovered from the processing of 562,060 tonnes of ore at an attributable grade of 40 carats per hundred tonnes. Grade and carat recoveries during the quarter reflect the processing of lower grade ore as the Renard Mine transitions from open pit to underground mining. Open pit mining at Renard 2 was completed in March and at Renard 3 in April. Ore processed during the quarter was sourced primarily from the underground mine, from low grade stockpiles, and from the Renard 65 open pit. Carat production during the second quarter was consistent with the revised guidance for the Renard Mine issued on May 15, 2018.
Ramp up of the Renard 2 underground mine production progressed during the second quarter, with average daily production rates being 1,538 tpd in April, 4,342 tpd in May, and 3,864 tpd in June. Development of an Assisted Block Cave as the principal mining method in the underground mine is proceeding well, with the focus being on achieving optimum granulometry for the blasted ore and opening up multiple panels to support the planned mining rate. Currently, however, production rates are being restricted more by equipment availability than by the quantity of ore in drawpoints available for mucking. As expected, the low grades and high dilution observed in the initial panels developed at the margin of the ore body are giving way to higher grades and lower dilution as mining panels are opened within the main body of the kimberlite. Processing rates in the quarter averaged 6,460 tonnes per day compared to an annual plan of 7,000 tonnes per day.
The new ore sorting plant (“OSP”) at Renard was commissioned during the quarter, and has been processing ore on a consistent basis since mid-May. The volume and quality of waste segregated from the ore-feed has exceeded expectations, with waste rejected representing between 15% and 30% of material sorted. Kimberlite content in the waste stream has averaged between 1% and 2%.
This has resulted in a significant reduction in process plant head-feed and opened up new plant capacity for future exploitation. Because the waste within the Renard ore is hard and difficult to crush, its rejection from the main process plant has also resulted in a net reduction in power consumption for processing even with the addition of the new sorting circuit.
Considering the highly abrasive characteristics of the ore processed to date through the OSP, consisting mainly of highly diluted, low grade material, the diamonds recovered since its introduction have exhibited lower levels of breakage than observed previously with comparable feed composition.
Balance Sheet and Financial Liquidity
At quarter end, cash and cash equivalents stood at $31.6 million and Available Liquidity5 to the Corporation, including available credit facilities, stood at $46.5 million (on a preliminary and unaudited basis). These amounts exclude $15.9 million representing restricted deposits related to debt service reserve accounts. During the second quarter the Corporation was engaged in discussions with its lenders to amend the terms of certain debt instruments to better suit the working capital requirements of the business pending the expected attainment of free cash flow. Pursuant to these discussions, which are ongoing, both Diaquem Inc., a wholly owned subsidiary of Investissement Quebec and Stornoway’s senior lender, and Fonds de Solidarité FTQ, an unsecured lender, have agreed to the deferral of principal payments totalling $10.4 million (on senior and unsecured indebtedness totalling $129.7 million) from June 30, 2018 to September 30, 2018. Diaquem Inc. also agreed to waive the obligation of the Corporation to meet the historical debt service coverage ratio and the projected debt service coverage ratio under the credit agreement dated July 8, 2014, until September 30, 2018.
NON-IFRS FINANCIAL MEASURES
This document refers to certain financial measures, such as Available Liquidity, which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. As a result, these measures may not be comparable to similar measures reported by other corporations.
Each of these measures have been derived from the Corporation’s financial statements and have been defined and calculated based on management’s reasonable judgement. These measures are used by management and by investors to assist in assessing the Corporation’s performance. The measures are intended to provide additional information to the user and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
“Available Liquidity” comprises cash and cash equivalents and available credit facilities (less related upfront fees) and is used by the management and investors to measure the amount of cash resources available to the Corporation, over and above the cash generated from operations, to support the operating and capital requirements of the business.
ABOUT THE RENARD DIAMOND MINE
The 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.
Disclosure of a scientific or technical nature in this press release was prepared under the supervision of M. Patrick Godin, P.Eng. (Québec), Chief Operating Officer a “qualified person” under National Instrument (“NI”) 43-101.
ABOUT STORNOWAY DIAMOND CORPORATION
Stornoway is a leading Canadian diamond exploration and production company listed on the Toronto Stock Exchange under the symbol SWY and headquartered in Montreal. A growth oriented company, Stornoway owns a 100% interest in the world-class Renard Mine, Québec’s first diamond mine.
On behalf of the Board
STORNOWAY DIAMOND CORPORATION
/s/ “Matt Manson”
President and Chief Executive Officer
|For more information, please contact Matt Manson (President and CEO) at 416-304-1026 x2101
or Orin Baranowsky (CFO) at 416-304-1026 x2103 or Sébastien Huot (Manager, Financial Reporting and Investor Relations) at 450-616-5555 x2223
or toll free at 1-877-331-2232Pour plus d’information, veuillez contacter Sébastien Huot (Directeur, Information Financière et Relations Investisseurs) au 450-616-5555 x2223, firstname.lastname@example.org** Website: www.stornowaydiamonds.com Email: email@example.com **