Stornoway Diamond Corp Reports Bigger Loss on Year in First Quarter
May 17, 18 by Albert Robinson
(IDEX Online) – Stornoway Diamond Corporation reported a net loss of $11.0 million for the quarter ended March 31 compared to a net loss of $1.2 million in the year-earlier period.
During the quarter, three tender sales totaling 399,135 carats were completed for gross proceeds of $56.6 million at an average price of $112 per carat from $142 per carat in the year-earlier quarter. Revenue recognized was $55.9 million derived from the sale of 271,518 carats of run of mine production in two tender sales at an average price of $106 per carat ($135 per carat last year), and the sale of 42,663 carats of incidental production in one out of tender contract sale at an average price of $19 per carat ($24 per carat last year).
Revenue from the third tender sale of the year, which comprised 127,616 carats of run of mine production sold at an average price of $123 per carat ($156 per carat last year), will be recognized in the second quarter.
Matt Manson, President and CEO, commented: “Our first quarter results reflect the transitional nature of our business, as we move from open pit to underground mining. During this transition, carat production is being negatively impacted by the processing of the lower grade ore currently available to us in our stockpiles and in the first underground stopes. This has prompted us to reduce our full year production and sales guidance. At the same time, however, we have been encouraged by strong pricing in the diamond market, with first quarter prices trending well ahead of those achieved in 2017, and our operating and capital expenditures are within plan. We are also encouraged by the progress of our underground mining and the initial results from our ore-waste sorting, which is giving some very early indications of improved diamond recoveries and exceeding our expectations in terms of the volume and quality of the material sorted.”
“By the end of the second quarter the Renard mine will have fully transitioned to underground mining supported by ore sorting, and major capital expenditures will be behind us. This will be the character of our business going forward, with growing production driven by increasing grade and excess processing capacity. All of this has been achieved with the capital structure and financial liquidity established in our original 2014 construction funding. As we move forward, we are in discussions with our lenders to amend the terms of certain debt instruments to better suit our working capital requirements as an operator and in support of the further growth of the business.”
During the quarter, 3 tender sales totaling 399,135 carats were completed for gross proceeds of $56.6 million at an average price of $112 per carat ($142 per carat last year). The third tender sale of year, completed in March, comprised 127,616 carats of run of mine production sold for gross proceeds of $19.9 million at an average price of US$123 per carat ($156 per carat last year). Proceeds from this sale will be recognized as revenue in the second quarter since deliveries to clients were made subsequent to the quarter-end. In addition, during the quarter, the corporation sold 42,663 carats of incidental production in one out of tender contract sale at an average price of $19 per carat ($24 per carat last year). This compares to 459,126 carats sold in three tender sales events and three out of tender contract sales in the first quarter of 2017, with gross proceeds of $44.5 million at $73 per carat ($97 per carat last year).
Commentary on Diamond Production and Revised Guidance
During the first quarter, diamond production was lower than budgeted due to the unscheduled processing of lower grade ore based on availability. As the Renard mine transitions from open pit to predominantly underground mining, the processing of low grade ore derived from surface stockpiles and the initial stope development is expected to continue into the second quarter. This will impact Stornoway’s full year production forecast negatively.
In consequence, full year production guidance has been revised downwards to between 1.35 million carats and 1.40 million carats from 1.6 million carats at a recovered grade of between 54 and 56 cpht from 65 cpht. Full year guidance for carats sold has been revised downwards to between 1.20 million carats and 1.25 million carats from 1.60 million carats.
No change to guided diamond pricing is being made at this time. To date in 2018, including goods sold in the third tender sale event of 2018, Stornoway has sold +7 DTC sized diamonds at an average price of US$148 per carat (compared to guidance of US$125 to US$165 per carat), and -7 DTC sized diamonds at an average price of US$20 per carat (compared to guidance of US$15 to US$19 per carat).
No change to guided tonnes mined and tonnes processed is being made at this time. No change to guided capital or operating cost expenditures are being made at this time. Cash operating cost per carat is expected to be between $88 and $90 per carat owing to the lower expected carat production.