Skip to main content

Longueuil, Que.-based Stornoway said in a release it now expects to produce between 1.35 million and 1.4 million carats of diamonds this year, down from an initial forecast of 1.6 million carats.

STORNOWAY

Canadian diamond miner Stornoway Diamond Corp. has cut its production and sales guidance for the year, putting pressure on its balance sheet at a critical time as it shifts operations at its Renard mine from open pit to below ground.

The shares fell 5 per cent to $0.54 in Toronto trading on Wednesday afternoon.

Longueuil, Que.-based Stornoway said in a release it now expects to produce between 1.35 million and 1.4 million carats of diamonds this year, down from an initial forecast of 1.6 million carats. The company also revised its expectation for carats sold, to between 1.2 million carats and 1.25 million carats from 1.6 million previously.

Story continues below advertisement

As Stornoway exhausts its open-air pits at Renard and shifts to underground mining, the transition left the company with lower-grade ore from stockpiles and from initial subterranean mining during the first three months of the year. That in turn means lower diamond volumes processed and sold.

“You eat what you kill,” chief executive Matt Manson said in an interview, repeating an expression from a call with analysts earlier in the day. “And that’s essentially what we have to process.” The situation was not helped by the fact that the miner decided to leave some high-grade ore in the bottom of the pits, rather than take it out for safety reasons during poor winter weather conditions, he said.

The reduced guidance will put pressure on Stornoway’s cash position as it wraps up its initial capital investments in the Renard mine, the company said. To relieve some of that pressure, the company said it would seek to amend the terms of certain debt agreements with lenders to better suit its working-capital requirements. The company’s main lender and key shareholder in Renard is the Quebec government. Stornoway finished the quarter with about $72-million in liquidity.

The development marks another rare snag in what has otherwise been a carefully executed start at Renard, Quebec’s first diamond mine. Stornoway built the Renard mine in the Otish Mountains, a range of hills north of Lac Mistassini in north-central Quebec, in the summer of 2016 with a $946-million financing package. The project came in under budget and five months ahead of schedule, igniting hopes that it will lead to other resource development in the province’s vast northern territory.

Despite its great promise, Renard hit an early complication last year when its diamonds were found to be breaking in processing at a higher frequency than the company expected. The miner built an extra ore-sorting facility to fix the problem at a cost of $22-million and early diamond recovery since the plant has come online this spring has been encouraging, the company says.

One bright point for Renard is the price its diamonds are fetching at international auction. The company says market dynamics are improving for producers generally as supply shrinks. In addition, it says attendance at its own sales events has steadily increased through 2017 and into 2018, while prices for Renard diamonds jumped 20 per cent over all between the first sale in November, 2016, and March of this year.

Notable diamonds recovered at Renard include a 37-carat, triangular-shaped gem that sold for US$1.3-million. The stone, a perfect, flawless diamond, was a so-called Type II-a, which means it contains no nitrogen. Renard was thought not to contain Type-II diamonds, so finding one was a major surprise, Mr. Manson told shareholders at Stornoway’s annual meeting on Tuesday.

Story continues below advertisement

Renard also yielded an 189-carat diamond, the largest gem-quality ever reported recovered in Canada by a producer, the CEO said. He said the fact Stornoway discovered such a big gem barely a year into production gives you a sense of the potential of the project.

“Quebec’s first diamonds are very popular in the market,” Mr. Manson said. “We’re getting the bigger ones coming through as well. And everybody is waiting for the big showstopper to arrive. It will happen.”

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter