Stornoway Says Diamond Breakage Affecting Sales Results

(IDEX Online) – Stornoway Diamond Corporation reported diamond production of 417,362 carats at its Renard diamond mine for the quarter ended June 30 which was 13 percent below the planned 486,591 carats due to the processing of lower grade ore and diamond breakage, the miner said.

Two tender sales were completed during the quarter. In total, 350,159 carats were sold for an average price of $87 per carat. This compares to an average price of $81 achieved in the first quarter. Immediately subsequent to the quarter end, Stornoway completed its sixth sale of the year, where 151,135 carats were sold for gross proceeds of C$19.8 million, at an average price of $101 per carat. All sales prices are on a run-of-mine basis.

"The average pricing being achieved in the Renard diamond sales is strongly impacted by the ongoing issues of diamond breakage in the process plant, which reduces the proportion of larger diamonds available for sale, and volatility in the proportion of small diamonds in the sales mix," the miner commented. "Small diamonds continue to achieve substantially lower market pricing than was being achieved prior to the Indian de-monetization events of late 2016. Nevertheless, the average run of mine pricing for Renard diamonds, after accounting for size distribution and quality variations, has increased in real terms by 19 percent since the first sale was completed in November 2016.

"While the rough market has strengthened modestly during this period, the size of the increase reflects the growing acceptance of the Renard diamond production by Stornoway’s tender sale clientele. Stornoway’s sixth sale of 2017 achieved the first result above $100 per carat with a standard run-of-mine sales mix, despite continuing to exhibit a lower than expected proportion of larger diamonds. This is an encouraging result, and consistent with Stornoway’s FY2017 pricing guidance of $100 to $132 per carat. Stornoway expects to conclude two additional sales in the third quarter and two in the fourth quarter

Matt Manson, President and CEO, commented: “At the end of the second quarter, we are pleased to report robust production figures and the on-schedule attainment of our process plant’s nameplate capacity, marking the end of our processing ramp-up. With seven sales now completed, we are encouraged by strong growth in diamond pricing, reflecting the underlying market demand for the Renard product. This is despite the ongoing issue of diamond breakage which is impacting our production’s quality and size profile. Going into the second half of the year, we will remain focused on maximizing the value attributes of our diamond production and continuing the growth in revenue from sales."