Dominion Diamond Corporation (TSX:DDC, NYSE:DDC) (the “Company”
or “Dominion”) today released its guidance for sales, Adjusted
EBITDA(1), unit operating costs, and capital and exploration
expenditures for fiscal 2018 (ending January 31, 2018). All amounts
are in US dollars unless otherwise noted. An exchange rate of 1.33
CDN$/US$ was used for costs denominated in Canadian dollars.
Highlights
- Sales are expected to be between $875
and $975 million, an increase of 62% compared to fiscal 2017 sales,
assuming the mid-point of fiscal 2018 guidance is achieved.
- Adjusted EBITDA is forecast to be
between $475 and $560 million, reflecting a high margin ore mix,
combined with ongoing cost containment and efficiency
initiatives.
- The cash cost of production(2) is
expected to be between $70 and $80 per tonne processed and between
$35 and $40 per carat produced.
- Growth capital expenditures are
expected to total between $115 and $140 million, demonstrating a
commitment to investment in growth. Sustaining capital
expenditures, including capitalized production stripping, are
expected to total between $160 and $190 million.
- The production guidance released
earlier this year is reaffirmed for the Ekati Diamond Mine and
Diavik Diamond Mine. Combined production at the Ekati mine (100%
basis, fiscal 2018) and the Diavik mine (40% share, calendar 2017)
is expected to be between 9.1 and 10.0 million carats.
- Opportunities exist to enhance the
medium and longer-term production profile at Ekati, including the
potential development of the Misery Deep and Fox Deep projects, for
which pre-feasibility studies are currently underway.
“We continue to execute on our long-term strategic plan and to
deliver results. Our strong sales and Adjusted EBITDA forecasts for
fiscal 2018 are driven by high value production from Koala and
Misery Main, as Ekati moves to the first full year of the new phase
of the mine plan,” said Jim Gowans, Chairman of the Board of
Directors. “The cash flow generated by Ekati and Diavik during this
period is expected to be ample to fund our pipeline of attractive
growth projects and a renewed focus on exploration.”
(1)
The term EBITDA (earnings before interest, taxes,
depreciation and amortization) is a non-IFRS measure. Adjusted
EBITDA removes the effects of impairment charges, foreign exchange
gains (losses) and exploration costs from EBITDA.
(2)
Cash cost of production is a non-IFRS measure, and includes mine
site operating costs such as mining, processing and administration,
but is exclusive of amortization, capital, and exploration and
development costs. Cash cost per tonne processed and cash cost per
carat produced are calculated by dividing cash cost of production
by total tonnes processed and total carats produced, respectively.
The Company continues to deliver on its production plan and to
advance several projects at Ekati, in addition to the A-21 project
at Diavik. The Jay project is in the final stage of permitting,
with the water license expected this summer. In addition to the Jay
project and greenfield exploration, a number of near-term and
longer term development opportunities are being advanced in fiscal
2018 at the highly prospective Ekati property.
- Lynx project: Commercial production of
high value carats is expected in fiscal 2018.
- Sable project: First production of high
value carats is anticipated in fiscal 2020.
- Misery Deep project: A pre-feasibility
study is being completed on the development of an underground
operation below the final profile of the planned open pit. The
study is focused on the processing of additional high value ore
from the Misery pipe, and a positive outcome could lead to the
recovery of carats beyond fiscal 2020, enhancing the production
profile at Ekati. Completion of the pre-feasibility study is
expected in the second quarter of fiscal 2018.
- Fox Deep project: As disclosed in the
news release of February 22, 2017, based on encouraging bulk sample
results from the previously-mined Fox open pit, a pre-feasibility
study is underway to examine the economics of an underground mine
below the large open pit. As of July 31, 2016, the Fox kimberlite
pipe had an indicated resource of 35.2 million tonnes containing
11.6 million carats. A resource update is expected in the current
fiscal quarter. The pre-feasibility study is scheduled to be
completed in late fiscal 2018.
The guidance provided in this press release is qualified by the
“Forward-Looking Information” section of this press release.
Fiscal 2018 Financial
Guidance
Fiscal 2018 Financial Guidance Ekati
(100%) Diavik (40%)
Combined Sales(1) $ millions 575
- 645 300 - 330
875 - 975 Adjusted EBITDA(2) $ millions 315 -
370 180 - 210 475 - 560 Depreciation and Amortization in Cost of
Sales $ millions 225 - 265 85 - 100 310 - 365 Average price per
carat sold $/carat 60 -
80 90 - 110 70 -
90 Note: Totals may not add up due to rounding
(1)
Sales guidance for fiscal 2018 includes production from the
Misery Southwest pipe, which is currently an inferred resource
(this is the Operating Case). The mine plan for fiscal 2018
foresees between 1.3 and 1.4 million carats recovered from Misery
Southwest, with an estimated market value of between $48 and $52
million. Mineral resources that are not mineral reserves do not
have demonstrated economic viability. Inferred mineral resources
are considered too speculative geologically to have economic
considerations applied to them that would enable them to be
categorized as mineral reserves. There is no certainty that the
Operating Case will be realized.
(2)
Combined Adjusted EBITDA includes corporate G&A. EBITDA
(earnings before interest, taxes, depreciation and amortization) is
a non-IFRS measure. Adjusted EBITDA removes the effects of
impairment charges, foreign exchange gains (losses) and exploration
costs from EBITDA.
Sales are expected to be between $875 and $975 million, an
increase of 62% compared to fiscal 2017 sales, assuming the
mid-point of fiscal 2018 guidance is achieved. Sales are expected
to benefit from the focus on high value ore from the Misery Main
and Koala underground pipes at the Ekati mine in the latter part of
fiscal 2017 and the first quarter of fiscal 2018. This, combined
with the ramp up of ore from the Pigeon and Lynx pipes at Ekati
during the remainder of the year and strong production from the
Diavik mine, is expected to drive sales approaching $1 billion.
The diamond market continues to recover from the impact of
demonetization in India. The guidance for fiscal 2018 foresees the
sale of a higher volume of lower value diamonds that were
previously held back from sale due to the weaker market conditions
following the demonetization. This is expected to affect the
average price per carat sold as well as the number of carats
sold.
Adjusted EBITDA is expected to be between $475 and $560 million,
reflecting a high margin ore mix, combined with ongoing cost
containment and efficiency initiatives, including reduced energy
consumption and continued implementation of the long haulage
strategy at the Ekati mine, with the addition of two high-capacity
road trains.
The average price per carat sold is expected to range from $70
to $90 per carat. The upper end of the range reflects the potential
for a larger proportion of sales of higher value diamonds, while
the lower end of the range reflects the potential for a higher
proportion of sales of lower quality stones.
Sales, Adjusted EBITDA and the average price per carat sold in
any given quarter are impacted by seasonal trends in the diamond
industry, the number of sales in a quarter, ore mix, the sale of
special stones via a limited number of special tenders during the
year, and other factors. The Ekati mine contains a greater number
of kimberlite sources, each with different average price per carat
and grade profile compared to those at the Diavik mine. In the
first fiscal quarter, we expect the combined average price per
carat sold to be near the low end of the guidance range for the
full fiscal year, partly due to a significant amount of lower value
goods in inventory from recent Misery Main production, and weakness
in the lower value segment of the diamond market due to
demonetization in India. This is expected to reverse later in the
year with the processing of ore containing diamonds with a higher
average price per carat.
Fiscal 2018 Unit Production Cost
and Capital Expenditure Guidance
Fiscal 2018 Unit Cost(1)
Guidance
Ekati Diavik
Combined Cash Cost per Tonne Processed $/tonne
60 - 70 120 -
130 70 - 80 Total Cost per Tonne
Processed $/tonne 120 - 135 220 - 235 140 - 155 Cash Cost per Carat
Produced $/carat 35 - 40 35 - 40 35 - 40 Total Cost per Carat
Produced $/carat 65 - 75
60 - 70 65 -
75
(1)
Cash cost per tonne processed and cash cost per carat
produced are non-IFRS measures, and are calculated by dividing cash
cost of production by total tonnes processed and total carats
produced, respectively. Cash cost of production includes mine site
operating costs such as mining, processing and administration, but
is exclusive of amortization, capital, and exploration and
development costs. Total cost is comprised of cash cost plus
depreciation and amortization.
Per carat metrics in any particular quarter may vary from the
annual guidance due to changes in the ore blend.
Fiscal 2018 Capital Expenditure Guidance
Ekati (100%) Diavik (40%)
Combined Growth Capital $ millions
90 - 110 25 - 30
115 - 140 Sustaining Capital(1)
$ millions 140 - 170
13 - 15 160 - 190
(1) Combined sustaining capital includes corporate capital
expenditures.
Fiscal 2018 Capital Expenditure
Guidance – Ekati (100%)
Growth Capital $ millions 90
- 110 Percentage of Growth Capital Lynx 10%
Sable 50% Jay 25% Other
15% Total
100%
Sustaining Capital $ millions 140
- 170
Fiscal 2018 Capital
Expenditure Guidance – Diavik (40%) Growth Capital
A-21 $ millions 25
- 30 Sustaining Capital $ millions 13
- 15
The planned growth capital expenditures in fiscal 2018 include
$90 to $110 million at the Ekati mine and $25 to $30 million at the
Diavik mine. Of the planned growth capital expenditures at Ekati in
fiscal 2018, approximately $45 to $55 million is expected to be
spent at the Sable project, and approximately $25 million is
expected to be spent at the Jay project. The planned sustaining
capital expenditures include approximately $115 million of
capitalized production stripping at the Ekati mine.
Fiscal 2018 Exploration
Guidance
Fiscal 2018 Exploration Guidance Exploration Expenditures
$ millions 9 Ekati
(100%) 55% Diavik (40%) 10% Other
35% Total
100%
(1)
100% of expenditures on exploration in fiscal 2018 are
expected to be expensed
The Company is renewing its focus on exploration on its
extensive land package in the Lac de Gras region, which is still a
relatively new and highly prospective diamond mining district. A
robust exploration program is planned for fiscal 2018. The program
includes prioritization of the 150 known kimberlite pipes on the
Ekati property, and planning for a potential bulk sampling program
in fiscal 2019. Re-evaluation of historical data is underway on
undeveloped kimberlites, and diamond drilling is planned on up to
six targets in the Core Zone and Buffer Zone. At Diavik, drilling
of three known kimberlites is planned in 2017.
Most of the previous diamond exploration in the Lac de Gras
region was done during the diamond rush of the 1990s. Since that
time, significant improvements have been made to the methodology
and interpretative techniques that are used. Since the acquisition
of the Ekati mine, Dominion has had a strong track record of
reserve addition, including the conversion of 78.6 million carats
to mineral reserve at the Jay project and 10.1 million carats to
mineral reserve at the Sable project. The renewed focus on
exploration is expected to drive longer-term growth and shareholder
value.
Production Guidance
Reaffirmed
Production guidance for the Ekati and Diavik mines was released
earlier this year and is unchanged. During fiscal 2018, the Ekati
mine is expected to produce 6.3 to 7.0 million carats on a 100%
basis, from the processing of 3.7 to 4.0 million tonnes. During
calendar 2017, the Diavik mine is forecast to produce 7.1 to 7.6
million carats on a 100% basis, from the processing of 2.0 to 2.2
million tonnes.
Production Guidance Ekati (100%)
Fiscal 2018
Diavik (100%)
Calendar 2017
Combined(1) Tonnes mined (total)
millions 27 - 30 2.1
- 2.3(2) Tonnes processed
millions 3.7 - 4.0 2.0 - 2.2 Carats recovered (Base Case) millions
5.0 - 5.6 Carats recovered (Operating Case) millions
6.3 - 7.0(3) 7.1 -
7.6 9.1 - 10.0(3) (1)
Combined production includes 100% of Ekati production in fiscal
2018 and 40% of Diavik production in calendar 2017. (2) Excludes
1.2 million tonnes of waste mining at the A-21 project at Diavik
mine.
(3)
Reflects the Operating Case at Ekati mine;
this includes Misery Southwest pipe which is currently an inferred
mineral resource. Mineral resources that are not mineral reserves
do not have demonstrated economic viability. Inferred mineral
resources are considered too speculative geologically to have
economic considerations applied to them that would enable them to
be categorized as mineral reserves. There is no certainty that the
Operating Case will be realized.
Qualified Person
The mine plan for the Ekati Diamond Mine for fiscal 2018 was
prepared and verified by Dominion, operator of the Ekati Diamond
Mine, under the supervision of Peter Ravenscroft, FAusIMM, of
Burgundy Mining Advisors Ltd., an independent mining consultant,
and a Qualified Person within the meaning of National Instrument
43-101 of the Canadian Securities Administrators, and the mine plan
for the Diavik Diamond Mine for calendar 2017 was prepared and
verified by DDMI, operator of the Diavik Diamond Mine, under
the supervision of Calvin Yip, P.Eng., Principal Advisor,
Strategic Planning of DDMI, who is a Qualified Person within the
meaning of National Instrument 43-101 of the Canadian
Securities Administrators. The other scientific and technical
information contained in this press release has been prepared and
verified by Dominion, operator of the Ekati Diamond Mine, under the
supervision of Chantal Lavoie, P. Eng., Chief Operating Officer of
Dominion, and President of Dominion Diamond Ekati Corporation
(DDEC), and a Qualified Person within the meaning of National
Instrument 43-101 of the Canadian Securities Administrators. For
further details and information concerning the Company’s mineral
reserves and mineral resources at the Ekati Diamond Mine, please
refer to the technical report entitled “Ekati Diamond Mine,
Northwest Territories, Canada, NI 43-101 Technical Report” that has
an effective date of July 31, 2016. For further details and
information concerning the Company’s mineral reserves and resources
at the Diavik Diamond Mine, please refer to the technical report
entitled “Diavik Diamond Mine, Northwest Territories, Canada, NI
43-101 Technical Report” that has an effective date of March 18,
2015. These technical reports can be found on the Company’s profile
at www.sedar.com and on the Company’s website at www.ddcorp.ca.
Forward-Looking Information
The guidance information included herein, including information
about expected sales, Adjusted EBITDA, costs, capital expenditures
and diamond pricing, estimated production from, and development
activities at, the Ekati Diamond Mine and the Diavik Diamond Mine,
and expectations concerning the diamond industry, constitutes
forward-looking information or statements within the meaning of
applicable securities laws. Forward-looking information is based on
certain factors and assumptions including, among other things, the
current mine plan for each of the Ekati Diamond Mine and the Diavik
Diamond Mine; mining, production, construction and exploration
activities at the Ekati Diamond Mine and the Diavik Diamond Mine;
currency exchange rates; world and US economic conditions; future
diamond prices; and the level of worldwide diamond production.
Forward-looking information is subject to certain factors,
including risks and uncertainties, which could cause actual results
to differ materially from what the Company currently expects. These
factors include, among other things, the uncertain nature of mining
activities, including risks associated with underground
construction and mining operations, risks associated with joint
venture operations, risks associated with the remote location of
and harsh climate at the Company’s mining properties, variations in
mineral reserve and mineral resource estimates, grade estimates and
expected recovery rates, failure of plant, equipment or processes
to operate as anticipated, risks associated with regulatory
requirements, the risk of fluctuations in diamond prices and
changes in US and world economic conditions, the risk of
fluctuations in the Canadian/US dollar exchange rate and cash flow
and liquidity risks. Actual results may vary from the
forward-looking information. Readers are cautioned not to place
undue importance on forward-looking information, which speaks only
as of the date of this disclosure, and should not rely upon this
information as of any other date. While the Company may elect to,
it is under no obligation and does not undertake to, update or
revise any forward-looking information, whether as a result of new
information, further events or otherwise at any particular time,
except as required by law. Additional information concerning
factors that may cause actual results to materially differ from
those in such forward-looking statements is contained in the
Company's filings with Canadian and United States securities
regulatory authorities and can be found at www.sedar.com and
www.sec.gov, respectively.
About Dominion Diamond Corporation
Dominion Diamond Corporation is a Canadian diamond mining
company with ownership interests in two major producing diamond
mines. Both mines are located in the low political risk environment
of the Northwest Territories in Canada. The Company operates the
Ekati Diamond Mine, in which it owns a controlling interest, and
also owns 40% of the Diavik Diamond Mine. It supplies premium rough
diamond assortments to the global market through its sorting and
selling operations in Canada, Belgium and India.
For more information, please visit
www.ddcorp.ca
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version on businesswire.com: http://www.businesswire.com/news/home/20170316006446/en/
Dominion Diamond CorporationJacqueline Allison,
416-205-4371Vice-President, Investor
Relationsjacqueline.allison@ddcorp.ca
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