Stornoway Diamond Corporation (TSX-SWY; the “Corporation”
or “Stornoway”) is pleased to report financial and
operating results for the quarter ended September 30, 2018.
QUARTER ENDED SEPTEMBER 30, 2018
HIGHLIGHTS:
(All quoted figures in CAD$, unless otherwise
noted)
- For the three months ended
September 30, 2018, Stornoway reported a net loss of $37.6 million
($0.05 per share on a basic and fully diluted basis). Adjusted net
loss1 for the quarter was $31.7 million.
- During the quarter, two tender
sales totalling 184,620 carats were completed for gross proceeds2
of $24.8 million3 at an average price of US$103 per carat ($134 per
carat3). Revenue recognized was $29.4 million, derived from the
sale of the above mentioned run of mine production and the sale of
21,367 carats of incidental production in one out of tender
contract sale at an average price of US$13 per carat ($17 per
carat1,[4]). Third quarter diamond sales represent diamonds
recovered during the second quarter.
- Third quarter diamond production
was 329,306 carats produced from the processing of 597,761 tonnes
of ore at an average grade of 55 carats per hundred tonnes
(“cpht”). Grade and carat recoveries during the quarter improved by
39% and 47% respectively compared to the second quarter with the
mining of higher grade ore.
- Underground mining during the
quarter comprised 571,405 tonnes, with 475,289 tonnes of ore
extracted. Ramp up of the underground mine production was completed
during the quarter and a steady feed was achieved from underground
mining operations.
- 2018 carats produced and carats
sold are expected within the low end of range for 2018 revised
guidance on lower tonnes at higher average grades. Cash operating
costs per tonne processed1 and per carat recovered1 are expected to
be at the high end of the range, while capital expenditures1 are
expected to be below guidance. Average diamond pricing achieved1 is
expected to be within guidance.
- During the quarter, the new
ore-sorting circuit at Renard was fully operational. Diamond
recoveries since its introduction have exhibited lower levels of
breakage than observed previously with comparable feed composition,
and overall diamond liberation from ore has been
improved.
- A program of Mineral Resource
expansion and conversion was undertaken on the Renard 3 and Renard
4 kimberlites with a view to their acceleration in the Renard mine
plan. Positive drilling and sampling results have been
obtained.
- Cash operating costs per tonne
processed1 were $57.15 per tonne ($103.74 per carat) and capital
expenditures1 were $22.5 million.
- For the third quarter of FY2018,
Stornoway reported adjusted EBITDA1 of $(11.8) million, or (47.2)%
of Adjusted Revenues1, which includes an $13.9 million write-down
of cash costs to bring inventory to its net realizable value.
- Subsequent to the quarter end, the
corporation completed a series of financing transactions with
lenders and key stakeholders that represent additional
consideration and liquidity to the corporation of up to $129
million.
1
See “Non-IFRS Financial Measures” section2 Before stream and
royalty`3 Based on an average $:US$ conversion rate of $1.304 Based
on an average $:US$ conversion rate of $1.31 |
Matt Manson, President and CEO, commented: “Our
third quarter financial results reflect the sale in July and
September of diamonds recovered between April and June, when the
underground mine was ramping up with low grade ore. Since attaining
full design capacity in the underground mine in late August, we
have achieved our best two months of the year in terms of diamond
production, with 130,000 carats recovered in September at a grade
of 64 cpht and then, subsequent to the quarter end, 161,000 carats
in October at a grade of 74 cpht. We continue to see weakness in
the diamond market, particularly in smaller and lower quality
items, and this has continued through into the fourth quarter.
However, the Renard mine is now meeting or exceeding expectations
in terms of tonnes mined, tonnes processed and carat recoveries,
and we expect to come in within our revised 2018 guidance for
carats produced and carats sold, albeit at the lower end of our
range based on lower tonnes at a higher average grade. With our
balance sheet strengthened following the $129 million in financing
agreements announced on October 2nd, and with steady state
operations achieved at the Renard Mine, our outlook for the
remainder of the year and into 2019 is positive.”
Table 1. Financial Results Highlights
(expressed in millions of Canadian dollars,
except as otherwise noted)
|
Three months ended |
|
Six months ended |
|
|
Sept 30, 2018 |
|
Sept 30, 2017 |
|
Sept 30, 2018 |
|
Sept 30, 2017 |
|
Open pit tonnes mined
(tonnes) |
645,527 |
|
1,074,148 |
|
1,684,133 |
|
3,648,673 |
|
Underground ore tonnes
mined (tonnes) |
475,289 |
|
52,162 |
|
888,724 |
|
88,730 |
|
Ore processed
(tonnes) |
597,761 |
|
506,381 |
|
1,722,341 |
|
1,437,619 |
|
Carats Recovered |
329,306 |
|
442,154 |
|
838,507 |
|
1,244,667 |
|
Carats Sold |
205,987 |
|
405,643 |
|
891,047 |
|
1,214,928 |
|
Revenues |
29,356 |
|
49,977 |
|
142,216 |
|
141,019 |
|
Cost of Goods Sold |
54,834 |
|
40,084 |
|
173,053 |
|
105,984 |
|
Selling, General,
Administrative and Exploration Expenses |
5,536 |
|
4,460 |
|
18,178 |
|
15,364 |
|
Financial expenses |
22,439 |
|
5,410 |
|
59,893 |
|
4,891 |
|
Foreign exchange loss
(gain) |
(1,737 |
) |
(4,601 |
) |
3,716 |
|
(8,861 |
) |
Net (loss) income |
(37,645 |
) |
2,289 |
|
(84,489 |
) |
4,226 |
|
Net loss per Share –
Basic and Diluted |
(0.05 |
) |
Nil |
|
(0.10 |
) |
0.01 |
|
Adjusted Net Loss1 |
(31,726 |
) |
(4,212 |
) |
(76,948 |
) |
(11,722 |
) |
Adjusted EBITDA1 |
(11,766 |
) |
21,685 |
|
(10,776 |
) |
59,778 |
|
Adjusted EBITDA margin
(%)1 |
-47.2 |
% |
43.4 |
% |
-9.6 |
% |
42.4 |
% |
Capital
expenditures1 |
22,457 |
|
31,222 |
|
73,432 |
|
79,287 |
|
FINANCIAL SUMMARY
Revenues during the third quarter of 2018 were
$29.4 million compared to $50.0 million in the third quarter of
2017. Revenues in the current quarter include $7.5 million
recognized from contract liabilities related to the upfront
proceeds received under the Renard Stream agreement in
consideration for future commitments to deliver diamonds at
contracted prices ($6.0 million Q3 2017).
Stornoway reported a net loss of $37.6 million
(net income of $2.3 million Q3 2017) and an Adjusted Net Loss of
$31.7 million (Q3 2017 $4.2 million) reflecting a decrease in gross
profit, which includes a $22.4 million write down to bring
stockpile, work in progress and finished goods inventories to their
net realizable value, partially offset by an increase in deferred
income tax recovery. Adjusted EBITDA1 was a loss of $11.8
million, reflecting an increase in operating expenses including a
$13.9 million write down of inventories to their net realizable
value due to processing of lower grade materials. Capital
expenditures were $22.5 million in the quarter and $73.4 million
year to date.
OPERATIONAL SUMMARY
Environment, Health, Safety and Communities
Zero lost time incidents (“LTI”) were recorded
during the quarter, for a year to date LTI rate of 0.53 for
Stornoway employees and 1.73 for contractors for a combined LTI
frequency of 0.90. Stornoway employees stood at 571 as at September
30, 2018, including 515 mine located employees, of which 14% were
Crees, 22% were from Chibougamau and Chapais, and 64% were from
outside the region. There were no incidences of environmental
non-compliance reported in the quarter.
Mining and Processing
During the third quarter, 645,527 tonnes were
mined from the Renard 65 open pit, with 160,933 tonnes of ore
extracted. A total of 571,405 production and development tonnes
were mined from the Renard 2 underground mine during the quarter,
of which 475,289 tonnes ore were extracted. Production during the
quarter was 329,306 carats recovered from the processing of 597,761
tonnes of ore at an attributable grade of 55 cpht. Grade and carat
recoveries during the quarter reflect the improvement in grades in
the underground mine relative to the second quarter. Mining
and processing were affected by a forest fire in early July, which
saw non-essential staff evacuated from the mine site, and
production halted for 3 days. Processing rates in the third
quarter averaged 6,500 tonnes per day, with rates in September
averaging 6,820 tonnes per day.
Ramp up of the Renard 2 underground mine
production progressed during the third quarter and was completed by
the end of the quarter. The development of an Assisted Block Cave
as the principal mining method in the underground mine continued,
with current focus on achieving optimum granulometry for the
blasted ore and opening up multiple panels to support the planned
mining rate. The ramp up in the underground mine was completed
during the quarter and a steady feed to the process plant was
achieved. The underground mine now has sufficient equipment
and manpower to achieve designed mining rates. The first mining
panels opened up at the margin of the orebody at the 290 meter
production level were composed of highly diluted lower grade ore
which impacted carat production in the early stages of the
underground mine. As expected, however, grades have increased as
additional panels have been opened in less diluted ore within the
main body of the kimberlite, which will be the focus of mining
activities in the fourth quarter.
The new ore sorting plant at Renard was
commissioned during the second quarter, and has been processing ore
on a consistent basis since mid-May. The diamonds recovered since
its introduction have exhibited lower levels of breakage than
observed previously with comparable feed composition and, overall,
breakage has been successfully maintained at sustainably low levels
despite the high level of highly diluted, lower grade material
supplied to the plant during this period. In addition, higher than
expected diamond recoveries have also been observed since the
beginning of ore-sorting, indicating that a more efficient
liberation of diamonds is being achieved from the ore passed
through to the main process plant.
During the quarter, the volume and quality of
waste segregated during ore-sorting has exceeded expectations, with
waste rejected representing between 15% and 30% of material sorted.
Kimberlite content in the waste stream has averaged between 1% and
2%. This has resulted in a significant reduction in process plant
head-feed and opened up new plant capacity for future production.
Because the waste within the Renard ore is hard and difficult to
crush, its rejection from the main process plant has also resulted
in a net reduction in power consumption for processing even with
the addition of the new sorting circuit.
Diamond Sales
During the quarter, two tender sales totalling
184,620 carats were completed for gross proceeds2 of $24.7 million3
at an average price of US$103 per carat ($134 per carat1,3).
Revenue recognized during the quarter was derived from run of mine
production recovered during the second quarter. In addition to the
sale of run of mine production, an additional 21,367 carats of
diamonds smaller than the ‐7 DTC sieve size were sold during the
quarter in an out of tender contract sale for gross proceeds2 of
$0.4 million3 at an average price of US$13 per carat ($17 per
carat4). These represent recoveries of small diamond “incidentals”
produced between June and August 2018 that are in excess of that
expected from the Renard Mineral Resource.
On a segmented basis, including the results of
the sale of “incidentals”, 140,872 carats of +7 DTC sieve size
diamonds were sold at an average price of US$130 per carat ($169
per carat4), and 65,115 carats of -7 DTC sieve size diamonds were
sold at an average price of US$15 per carat ($20 per
carat3).
Capital Projects
Capital expenditures of $22.5 million in the
quarter were principally related to the development of the
underground mine, the purchase of additional underground mining
equipment and open pit development in Renard 65.
Development capital expenditures in the
underground mine during the third quarter focused on lateral
development on the 290 meter level access and drilling drifts for
the upper portion of the mine, as well as development of the main
ramp towards the 470 meter level. A total of 944 meters of lateral
development were completed. Underground mine development in the
fourth quarter will focus on development of the ramp towards 470
meter level and level access to the Renard 3 kimberlite.
2018 Production and Financial Guidance
On May 14, 2018, the Corporation issued revised
production guidance for the Renard Mine. Based on production rates
achieved since the attainment of full underground mining in late
August, and the scheduled sales remaining in 2018, carats produced
and carats sold are expected to be at the low end of 2018 guidance
as a result of lower tonnes processed, with average grades at the
top end of the range, or slightly higher. Overall tonnes mined in
the open pit and underground are expected to be lower due to lower
waste mining in both the open pit and underground mine, and the
slower than forecast ramp up of underground mining in 2018. Capital
expenditures are expected to be below guidance due to the
cancellation or deferral of certain capital projects. Pricing is
expected to be within guidance.
|
May 14, 2018 Guidance |
Updated Guidance |
Carats Recovered |
1.35 to 1.40
million |
Low End of Range |
Grade |
54 to 56 cpht |
High End of Range or
Slightly Above |
Tonnes Processed |
2.5 million |
2.35 to 2.4
million |
Carats Sold |
1.20 to 1.25
million |
Low End of Range |
Average Diamond Price
Achieved (+7) |
US$125-165 |
Middle of Range |
Average Diamond Price
Achieved (-7) |
US$15-19 |
Middle of Range |
Open Pit Tonnes Mined
(Ore and Waste) |
2.7 million |
2.4 to 2.5 million |
Underground Tonnes
Mined (Ore and Waste) |
2.2 million |
1.80 to 1.85
million |
Capital
Expenditures |
$100 million |
$90 to $95 million |
Cash Operating
Cost/Tonne |
$48-$50 |
High End of Range or
Slightly Above |
Cash
Operating Cost/Carat |
$88-$90 |
High End
of Range or Slightly Above |
Exploration
During the third quarter, a program of resource
development work was undertaken on the Renard 3 and Renard 4
kimberlites with a view to the conversion of certain Mineral
Resources to Mineral Reserves, and the acceleration of both ore
bodies in the Renard mine plan.
At Renard 3, a program of underground drilling
was undertaken to test the depth potential of the Renard 3
kimberlite below the base of the currently defined Mineral Reserves
at a depth of 255 meters below surface. Renard 3 was successfully
delineated over 5,345 meters of drilling between 255 meters and 290
meters depth, with additional intersections of kimberlite confirmed
over mineable widths to as deep as 315 meters below surface, below
which Renard 3 remains open. The new data are being incorporated
into a revised geological model and Mineral Resource estimate for
Renard 3, with a view to the incorporation of new Renard 3 Mineral
Reserves above the 290 meter level into the 2019 mining
schedule.
At Renard 4, a new surface sample was excavated
from an area of the kimberlite that occurs close to surface
adjacent to Lagopède Lake. The Renard 4 kimberlite currently
comprises 1.67 mcarats of Probable Mineral Reserves (3.46 mtonnes
at an average grade of 48 cpht) in the underground mine plan, as
well as 1.99 mcarats of Indicated Mineral Resources (2.93 mtonnes
at an average grade of 68 cpht) and 2.46 mcarats of Inferred
Mineral Resources (4.75 mtonnes at an average grade of 52 cpht). In
2007, a 2,104 tonne surface sample located on a nearby outcrop of
the high grade Renard 4d unit returned 2,722 carats of diamonds at
a grade of 129 cpht. The new sampling is designed to recover
parcels of diamonds from the lower grade Renard 4a and 4b units
which comprise the remainder of the Renard 4 diatreme. Sample
processing is ongoing. However, to date, a parcel of 574 carats of
diamonds have been recovered from the Renard 4b unit (1,287 tonnes
at 45 cpht), and 2,444 carats have been recovered from the Renard
4a unit (10,359 tonnes at 24 cpht). Of note, three “special” stones
have been recovered so far: a 14.89 carat white octahedral gem, a
12.42 carat white octahedral gem, and a 11.12 carat brown clivage
stone. Initial indications are that the grade, size distribution
and quality assortment of the diamonds recovered are consistent
with previous sampling.
In the Renard Mine Plan, the Renard 4 kimberlite
is scheduled for mining by underground method only following the
completion of mining at the Renard 2 and Renard 3 kimberlites. The
Corporation is investigating the potential for open pit mining at
the Renard 4 and nearby Renard 9 kimberlites to supply additional
ore feed earlier in the mine life. Such a pit would allow the
extraction of a portion, or all, of the approximately 1.99 million
carats of diamonds estimated to be contained in the top 140 meters
of the Renard 4 kimberlite. These diamonds are contained within the
project’s Indicated Mineral Resources, but are outside the current
Mineral Reserve as they occur in the area of the proposed crown
pillar for the Renard 4 underground mine. The results of the
current sampling will be used to support an economic assessment for
the development of a Renard 4-Renard 9 open pit, which will require
a water retention structure within Lagopède Lake. If successful,
such a pit would provide sufficient ore to take full advantage of
the increased process plant capacity created by the introduction of
the new ore-sorting circuit.
NON-IFRS FINANCIAL MEASURES
This document refers to certain financial
measures, such as Adjusted Net Loss, Adjusted Revenues, Adjusted
EBITDA, Adjusted EBITDA Margin, Average Diamond Pricing Achieved,
Cash Operating Cost per Tonne Processed, Cash Operating Cost per
Carat Recovered and Capital Expenditures, which are not measures
recognized under IFRS and do not have a standardized meaning
prescribed by IFRS. As a result, these measures may not be
comparable to similar measures reported by other corporations.
Each of these measures have been derived from
the Corporation’s financial statements and have been defined and
calculated based on management’s reasonable judgement. These
measures are used by management and by investors to assist in
assessing the Corporation’s performance. The measures are intended
to provide additional information to the user and should not be
considered in isolation or as a substitute for measures prepared in
accordance with IFRS. Refer to the “Non-IFRS Financial Measures”
section of the Corporation’s Management Discussion and Analysis as
at and for the quarter ended September 30, 2018 for further
discussion of these items, including reconciliations to IFRS
measures.
CONFERENCE CALL AND WEBCAST
Stornoway will host a conference call for
analysts and investors on November 14, 2018 at 11:00 a.m. EST. This
call may be accessed by calling 1 (844) 215-3287 toll free in North
America, or 1 (209) 905-5939 from international locations, with
Conference ID 8380317. A live webcast of the conference call will
also be available at https://edge.media-server.com/m6/p/4wb8hnvh. A
recording of the third quarter earnings conference call will be
made available on Stornoway’s website
www.stornowaydiamonds.com.
ABOUT THE RENARD DIAMOND
MINE
The Renard Diamond Mine is Quebec’s first
producing diamond mine and Canada’s sixth. It is located
approximately 250 km north of the Cree community of Mistissini and
350 km north of Chibougamau in the James Bay region of
north-central Québec. Construction on the project commenced on July
10, 2014, and commercial production was declared on January 1,
2017. Average annual diamond production is forecast at 1.8 million
carats per annum over the first 10 years of mining. Readers are
referred to the technical report dated January 11, 2016, in respect
of the September 2015 Mineral Resource estimate, and the technical
report dated March 30, 2016, in respect of the March 2016 Updated
Mine Plan and Mineral Reserve Estimate for further details and
assumptions relating to the project.
QUALIFIED PERSON
Disclosure of a scientific or technical nature
in this press release was prepared under the supervision of Mr.
Patrick Godin, P.Eng. (Québec), Chief Operating Officer and Mr.
Robin Hopkins, P.Geol. (NT/NU), Vice President, Exploration, both
“qualified persons” under National Instrument (“NI”) 43-101.
ABOUT STORNOWAY DIAMOND
CORPORATION
Stornoway is a leading Canadian diamond
exploration and production company listed on the Toronto Stock
Exchange under the symbol SWY and headquartered in Montreal. A
growth oriented company, Stornoway owns a 100% interest in the
world-class Renard Mine, Québec’s first diamond mine.
On behalf of the BoardSTORNOWAY DIAMOND
CORPORATION/s/ “Matt Manson”Matt MansonPresident and Chief
Executive Officer
For more information, please contact Matt Manson (President and
CEO) at 416-304-1026 x2101or Orin Baranowsky (CFO) at 416-304-1026
x2103 or Alexandre Burelle (Manager, Investor Relations and
Business Development) at 450-616-5555 x2264 or toll free at
1-877-331-2232Pour plus d’information, veuillez contacter Alexandre
Burelle (Directeur, Relations avec les investisseurs et
développement des affaires) au 450-616-5555 x2264,
aburelle@stornowaydiamonds.com** Website: www.stornowaydiamonds.com
Email: info@stornowaydiamonds.com ** |
FORWARD-LOOKING STATEMENTS
This document contains forward-looking
information (as defined in National Instrument 51‑102 – Continuous
Disclosure Obligations) and forward-looking statements within the
meaning of Canadian securities legislation and the United States
Private Securities Litigation Reform Act of 1995 (collectively
referred to herein as “forward-looking
information” or “forward-looking
statements”). These forward-looking statements are made as
of the date of this document and, the Corporation does not intend,
and does not assume any obligation, to update these forward-looking
statements, except as required by law.
These forward-looking statements relate to
future events or future performance and include, among others,
statements with respect to Stornoway’s objectives for the ensuing
year, our medium and long-term goals, and strategies to achieve
those objectives and goals, as well as statements with respect to
our management’s beliefs, plans, objectives, expectations,
estimates, intentions and future outlook and anticipated events or
results. Although management considers these assumptions to be
reasonable based on information currently available to it, they may
prove to be incorrect.
Forward-looking statements reflect current
expectations or beliefs regarding future events and include, but
are not limited to, statements with respect to: (i) the amount of
Mineral Reserves, Mineral Resources and exploration targets; (ii)
the estimated amount of future production over any period; (iii)
net present value and internal rates of return of the mining
operation; (iv) expectations and targets relating to recovered
grade, size distribution and quality of diamonds, average ore
recovery, carats recovered, carats sold, internal dilution, mining
dilution and other mining parameters set out in the 2016 Technical
Report as well as levels of diamond breakage; (v) expectations,
targets and forecasts relating to gross revenues, operating cash
flows and other revenue metrics set out in the 2016 Technical
Report, growth in diamond sales, cost of goods sold, cash cost of
production, gross margins estimates, planned and projected diamond
sales, mix of diamonds sold, and capital expenditures, liquidity
and working capital requirements; (vi) mine and resource expansion
potential, expected mine life, and estimated incremental ore
recovery, revenue and other mining parameters from potential
additional mine life extension; (vii) expected time frames for
completion of permitting and regulatory approvals related to
ongoing construction activities at the Renard Diamond Mine; (viii)
the expected time frames for the completion of the open pit and
underground mine at the Renard Diamond Mine; (ix) the expected
financial obligations or costs incurred by Stornoway in connection
with the ongoing development of the Renard Diamond Mine; (x)
mining, development, production, processing and exploration rates,
progress and plans, as compared to schedule and budget, and planned
optimization, expansion opportunities, timing thereof and
anticipated benefits therefrom; (xi) future exploration plans and
potential upside from targets identified for further exploration;
(xii) expectations concerning outlook and trends in the diamond
industry, rough diamond production, rough diamond market demand and
supply, and future market prices for rough diamonds and the
potential impact of the foregoing on various Renard financial
metrics and diamond production; (xiii) the economic benefits of
using liquefied natural gas rather than diesel for power
generation; (xiv) requirements for and sources of, and access to,
financing and uses of funds; (xv) the ability to meet Subject
Diamonds Interest delivery obligations under the Purchase and Sale
Agreement; (xvi) the foreign exchange rate between the US dollar
and the Canadian dollar; and (xvii) the anticipated benefits from
recently approved plant modification measures and the anticipated
timeframe and expected capital cost thereof. Any statements that
express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words
or phrases such as “expects”, “anticipates”, “plans”, “projects”,
“estimates”, “assumes”, “intends”, “strategy”, “goals”,
“objectives”, “schedule” or variations thereof or stating that
certain actions, events or results “may”, “could”, “would”, “might”
or “will” be taken, occur or be achieved, or the negative of any of
these terms and similar expressions) are not statements of
historical fact and may be forward-looking statements.
Forward-looking statements are made based upon
certain assumptions by Stornoway or its consultants and other
important factors that, if untrue, could cause the actual results,
performances or achievements of Stornoway to be materially
different from future results, performances or achievements
expressed or implied by such statements. Such statements and
information are based on numerous assumptions regarding present and
future business prospects and strategies and the environment in
which Stornoway will operate in the future, including the recovered
grade, size distribution and quality of diamonds, average ore
recovery, internal dilution, and levels of diamond breakage, the
price of diamonds, anticipated costs and Stornoway’s ability to
achieve its goals, anticipated financial performance, regulatory
developments, development plans, exploration, development and
mining activities and commitments, access to financing, and the
foreign exchange rate between the US and Canadian dollars. Although
management considers its assumptions on such matters to be
reasonable based on information currently available to it, they may
prove to be incorrect. Certain important assumptions by Stornoway
or its consultants in making forward-looking statements include,
but are not limited to: (i) the accuracy of our estimates regarding
capital and estimated workforce requirements; (ii) estimates of net
present value and internal rates of return; (iii) recovered grade,
size distribution and quality of diamonds, average ore recovery,
carats recovered, carats sold, internal dilution, mining dilution
and other mining parameters set out in the 2016 Technical Report as
well as levels of diamond breakage; (iv) the expected mix of
diamonds sold, and successful mitigation of ongoing issues of
diamond breakage in the Renard Diamond Mine process plant and
realization of the anticipated benefits from plant modification
measures within the anticipated timeframe and expected capital
cost; (v) the stabilization of the Indian currency market and full
recovery of prices; (vi) receipt of regulatory approvals on
acceptable terms within commonly experienced time frames and
absence of adverse regulatory developments; (vii) anticipated
timelines for the development of an open pit and underground mine
at the Renard Diamond Mine; (viii) anticipated geological
formations; (ix) continued market acceptance of the Renard diamond
production, conservative forecasting of future market prices for
rough diamonds and impact of the foregoing on various Renard
financial metrics and diamond production; (x) the timeline,
progress and costs of future exploration, development, production
and mining activities, plans, commitments and objectives; (xi) the
availability of existing credit facilities and any required future
financing on favourable terms and the satisfaction of all covenants
and conditions precedent relating to future funding commitments;
(xii) the ability to meet Subject Diamonds Interest delivery
obligations under the Purchase and Sale Agreement; (xiii)
Stornoway’s interpretation of the geological drill data collected
and its potential impact on stated Mineral Resources and mine life;
(xiv) the continued strength of the US dollar against the Canadian
dollar and absence of significant variability in interest rates;
(xv) improvement of long-term diamond industry fundamentals and
absence of material deterioration in general business and economic
conditions; and absence of significant variability in interest
rates; (xvi) increasing carat recoveries with progressively
increasing grade in LOM plan; (xvii) estimated incremental ore
recovery, revenue and other mining parameters from potential
additional mine life extension with minimal capital expenditures;
(xviii) availability of skilled employees and maintenance of key
relationships with financing partners, local communities and other
stakeholders; (xix) long-term positive demand trends and rough
diamond demand meaningfully exceeding supply; (xx) high depletion
rates from existing diamond mines; (xxi) global rough diamond
production remaining stable; (xxii) modest capital requirements
post-2018 with significant resource expansion available at marginal
cost; (xxiii) substantial resource upside within scope of mine
plan; (xxiv) opportunities for high grade ore acceleration and
processing expansion and realization of anticipated benefits
therefrom; (xxv) significant potential upside from targets
identified for further exploration; and (xxvi) limited cash income
taxes payable over the medium term.
By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and
specific, and risks exist that estimates, forecasts, projections
and other forward-looking statements will not be achieved or that
assumptions do not reflect future experience. We caution readers
not to place undue reliance on these forward- looking statements as
a number of important risk factors could cause the actual outcomes
to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates, assumptions and intentions
expressed in such forward-looking statements. These risk factors
may be generally stated as the risk that the assumptions and
estimates expressed above do not occur, including the assumption in
many forward-looking statements that other forward-looking
statements will not be correct, but specifically include, without
limitation: (i) risks relating to variations in the grade, size
distribution and quality of diamonds, kimberlite lithologies and
country rock content within the material identified as Mineral
Resources from that predicted; (ii) variations in rates of recovery
and levels of diamond breakage; (iii) the uncertainty as to whether
further exploration of exploration targets will result in the
targets being delineated as Mineral Resources; (iv) risks
associated with our dependence on the Renard Diamond Mine and the
limited operating history thereof; (v) unfavourable developments in
general economic conditions and in world diamond markets; (vi)
variations in diamond valuations and fluctuations in diamond prices
from those assumed; (vii) insufficient demand and market acceptance
of our diamonds; (viii) risks associated with the production and
increased consumer demand for synthetic gem-quality diamonds; (ix)
risks relating to fluctuations in the Canadian dollar and other
currencies relative to the US dollar and variability in interest
rates; (x) inaccuracy of our estimates regarding future financing
and capital requirements and expenditures, significant additional
future capital needs and unavailability of additional financing and
capital, on reasonable terms, or at all; (xi) uncertainties related
to forecasts, costs and timing of the Corporation’s future
development plans, exploration, processing, production and mining
activities; (xii) increases in the costs of proposed capital,
operating and sustainable capital expenditures; (xiii) increases in
financing costs or adverse changes to the terms of available
financing, if any; (xiv) tax rates or royalties being greater than
assumed; (xv) uncertainty of mine life extension potential and
results of exploration in areas of potential expansion of
resources; (xvi) changes in development or mining plans due to
changes in other factors or exploration results; (xvii) risks
relating to the receipt of regulatory approvals or the
implementation of the existing Impact and Benefits Agreement with
aboriginal communities; (xviii) the failure to secure and maintain
skilled employees and maintain key relationships with financing
partners, local communities and other stakeholders; (xix) risks
associated with ongoing issues of diamond breakage in the Renard
Diamond Mine process plant and the failure to realize the
anticipated benefits from plant modification measures within the
anticipated timeframe and expected capital cost, or at all; (xx)
the negative market effects of recent Indian demonetization and
continued impact on pricing and demand; (xxi) the effects of
competition in the markets in which Stornoway operates; (xxii)
operational and infrastructure risks; (xxiii) execution risk
relating to the development of an operating mine at the Renard
Diamond Mine; (xxiv) the Corporation being unable to meet its
Subject Diamonds Interest delivery obligations under the Purchase
and Sale Agreement; (xxv) future sales or issuances of Common
Shares lowering the Common Share price and diluting the interest of
existing shareholders; (xxvi) the risk of failure of information
systems; (xxvii) the risk that our insurance does not cover all
potential risks; (xxviii) the risks associated with our substantial
indebtedness and the failure to meet our debt service obligations;
and (xxix) the additional risk factors described herein and in
Stornoway’s annual and interim MD&A, its other disclosure
documents and Stornoway’s anticipation of and success in managing
the foregoing risks. Stornoway cautions that the foregoing list of
factors that may affect future results is not exhaustive and new,
unforeseeable risks may arise from time to time.