Stornoway Diamond Corp Posts Big Loss in Second Quarter

(IDEX Online) – Stornoway Diamond Corporation reported a net loss of $35.9 million for the three months ended June 30.

During the quarter, two tender sales totaling 201,283 carats were completed for gross proceeds of $28.6 million at an average price of US$109 per carat ($142 per carat).

Revenue recognized was $56.9 million, derived from the sale of 328,899 carats of run of mine production in three tender sales at an average achieved price of US$115 per carat ($147 per carat), and the sale of 41,979 carats of incidental production in one out of tender contract sale at an average price of US$19 per carat ($25 per carat).

Matt Manson, President and CEO, commented: “Our second quarter results reflect the continuing transition to underground mining at Renard, and the accompanying lower carat recoveries and sales during the first half of the year. Ramp-up of the underground mine has been slower than expected, but by the end of July, subsequent to the quarter-end, we had established sufficient drawpoints, equipment availability and manpower levels to achieve mining rates at or above our underground design capacity. As we move into the central mining areas of the Renard 2 kimberlite, and away from the ore body’s margins, we are also seeing the expected reduction in dilution and improvement in grade.

"Our new ore-sorting plant is performing well, costs are in line with plan, and we expect better carat recoveries and larger sales in the second half of the year. Achieving our 2018 production guidance at Renard, which was revised in May in consequence of the lower carat recoveries during the ramp-up, will be dependent on maintaining our current production levels and budgeted grade for the remainder of the year.

“Construction of the Renard mine, the ramp-up of processing, the introduction of ore-sorting, and the construction and ramp-up of the underground mine has all been achieved with the capital structure established in our original 2014 construction funding. Sales revenue during this period has been less than initially forecast, resulting in lower financial liquidity and cash flow than expected. Consequently, and as previously reported, we are engaged with our lenders and key stakeholders on certain amendments to financing agreements designed to provide greater financial flexibility in our operations, and provide sufficient working capital to the business as we work towards attaining free cash flow. These discussions have been positive and are currently ongoing.”