Dominion Swings to Loss in Fiscal Q3
December 11, 13
 The Ekati diamond mine. |
That resulted in earnings before interest, tax, depreciation and amortization (EBITDA), of $42.6 million or 28 percent. Consolidated operating profit from continuing operations was $10.7 million.
The company incurred $7.1 million of exploration expense for the third quarter compared to $0.7 million for the comparable period last year, including $6.0 million of exploration work on the Jay pipe within the Buffer Zone at the Ekati diamond mine.
The company recorded a consolidated net loss attributable to shareholders of $2.9 million for the quarter.
Robert Gannicott, Chairman and Chief Executive Officer, stated, "We continue to progress all of our operational and strategic objectives at Ekati while Diavik also continues to trim both capital and operating costs. The modest loss this quarter reflects expenditures on the Jay Project and a decision to hold inventory of some diamond parcels during the Diwali holiday season in India.
“The diamond market is generally stable, with a few items increasing in price while a few others are down, in a market that is focused on cash generation to decrease debt through inventory sales into robust retail demand."
“Although retail demand in the key markets of the US, China and Japan remains firm, tightened credit terms available to the polishing industry have led to softened prices for rough diamonds recently,” the firm said in a statement.
“The company has therefore elected to hold $95 million of rough diamond inventory (at market value) available for sale as stock at October 31, 2013 in the anticipation of improved demand. At October, 31, 2013, the company held rough diamond inventory (goods available for sale plus work in progress) of 1.5 million carats with an approximate market value of $250 million and cash on the balance sheet of $318 million (of which $122 million is restricted cash).
“The relocation of the Dominion Diamond senior management team and the company's headquarters to Yellowknife is already demonstrating benefits at the Ekati diamond mine. The focus on maximizing efficiencies and costs savings has resulted in a new lower cash cost forecast for FY2014 of $310 million, compared with the previous FY2014 cash cost forecast of $320 million. Likewise a similar emphasis on achieving cost savings at the Diavik diamond mine has led to a slightly lower cash cost forecast for FY2014 of $165 million, on a 40 percent basis, versus a previous forecast of $170 million.”
The firm’s capital expenditure forecast for FY2014 for the Ekati diamond mine has increased from $85 million to $100 million inclusive of capital expenditures at the Misery pipe of $42 million; first production from the Misery reserve is expected in March FY2017. The Misery pipe contains 3.0 million tonnes of probable reserve at a grade of 4 carats per tonne and an approximate value of $112 per carat.
Dominion has sold, post October 31, 2013, 300,000 carats for a value of approximately $60 million.
“Given the decision to hold back some inventory from sale in the third quarter, the company currently expects rough diamond sales for fiscal 2014 from the Diavik diamond mine to be in the range of $320 million to $365 million and the cost of sales for fiscal 2014 to be in the range of $235 to $270 million (including depreciation and amortization in the range of $70 to $85 million). For the Ekati diamond mine, the company currently expects rough diamond sales for fiscal 2014 to be in the range of $385 to $455 million (on a 100 percent basis) and the cost of sales for fiscal 2014 from the Ekati diamond mine to be in the range of $365 to $430 million (including depreciation and amortization in the range of $50 to $60 million).”