Stornoway Diamonds gets breathing room with bridge financing arrangement
June 16, 19
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Canadian diamond producer Stornoway Diamond finalized a bridge financing arrangement while it undergoes a continued strategic review. The Quebec-focused diamond miner has been engaged in a strategic review process since earlier this year, aiming to ensure the long-term viability of its flagship asset, the Renard diamond mine.
Despite the company's efforts to secure financing and cut operational costs, company shares were down as much as 43.31 percent this week.
Stornoway is to receive up C$11.7 million through a senior loan reserve account.
"In addition, amounts equivalent to royalty payments to be made by SDCI to Diaquem under the existing royalty agreement, up to an estimated amount of C$1.9 million, and to interest payments accruing under the senior loan agreement between SDCI and Diaquem up to an estimated amount of C$2.5 million, have agreed to be advanced by Diaquem," Stornoway said in an announcement.
The Renard mine's revenues for 2018 were down C$31 million from the previous year to C$165.5 million. Operating costs of Quebec's only diamond rose with C$41 million to C$128.9 million in 2018.
Diamond industry analyst and consultant Paul Zimnisky commented: "Given the position the company was in coming into 2019, it appeared they had at least 12 more months to allow for the diamond market to improve or for operational improvements to support profitability; however, missing cost guidance in Q1, coming in at C$57 per tonne versus C$47 to C$54, has really shortened that window," Zimnisky told the Investing News Network. Stornoway's skyrocketing operational costs have put it at a disadvantage in the current market despite global prices rising. Zimnisky continued, "This is despite the company realizing an improvement in average price per carat in Q1 of C$83, versus C$77 in Q4 2018, driven by a stronger product mix. That said, the average price in Q1 was still below the full-year 2018 average of C$93. For context, global rough diamond prices are up about 1 percent this year, according to the Zimnisky Global Rough Diamond Price Index.