Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the
“Company” or “Dominion”) today filed an updated technical report
under National Instrument 43-101 for the Diavik Diamond Mine
(“Diavik mine”) with an effective date of January 31, 2017. The
report, entitled “Diavik Diamond Mine, Northwest Territories,
Canada, NI 43-101 Technical Report” (“2017 Technical Report”), was
prepared by the operator of the Diavik mine, Diavik Diamond Mines
(2012) Inc. (“DDMI”), a subsidiary of Rio Tinto plc, and may be
found under the Company’s profile on SEDAR and on the Company’s
website at www.ddcorp.ca. The report includes an updated mineral
reserves and mineral resources statement and an updated
“reserves-only” life of mine plan. The Company has a 40% interest
in the Diavik mine; Rio Tinto plc has a 60% interest and operates
the mine through DDMI. Unless otherwise noted, all financial
information is presented in real Canadian dollars, on a 100% basis,
and references to years are to calendar years. An exchange rate of
1.33 CAD/USD was used for costs denominated in US dollars.
Highlights
- Mine life has been extended to 2025
from 2023(1).
- After-tax net present value of
approximately $2.6 billion at a 7% discount rate, based on the
assumptions and analysis contained in the 2017 Technical
Report(2).
- 46.0 million carats recovered between
2017 and 2025, an increase of 6.3 million carats or 16%, from the
previous estimate for the comparable period(3).
- Forecast total revenue of approximately
$9.0 billion and total operating cash flow(4) of approximately $3.7
billion between 2017 and 2025, an increase of 22% and 32%,
respectively, from the previous estimates for the comparable
period(3).
- Total operating costs between 2017 and
2025 are consistent with the previous estimate for the comparable
period(3), as the impact of cost escalation and the increase in
mine life and reclamation are offset by efficiency
improvements.
- Total capital expenditures between 2017
and 2025 are consistent with the previous estimate for the
comparable period(3), as lower expected capital expenditures at the
A-21 pipe are offset by higher sustaining capital expenditures
related to cost escalation and the increase in mine life.
“The updated life of mine plan for Diavik extends the mine life,
increases carat production, and grows future revenues and cash
flows, while maintaining operating costs and capital expenditures
at levels that are consistent with earlier forecasts,” said Jim
Gowans, Chairman of the Board of Directors. “The focus on cost
efficiency improvements and development of the A-21 pipe, which
underpins the mine life extension, is consistent with our goal of
increasing net asset value per share.”
(1)
Based on the technical report entitled “Diavik Diamond Mine,
Northwest Territories, Canada, NI 43-101 Technical Report” that has
an effective date of March 18, 2015 (“2015 Technical Report”).
(2)
Refer to the 2017 Technical Report for the assumptions used in the
calculation of the operating cash flow and net present value. The
cash flow analysis, from which operating cash flow and net present
value are derived, is solely for the purpose of demonstrating
economic viability of the mineral reserve at the Diavik mine, and
does not represent the business plans or cash flows of either
participant of the Diavik Joint Venture.
(3)
Comparable period for the previous estimate refers to years
2017-2023 in the 2015 Technical Report.
(4)
Operating cash flow is defined, for the purpose of this discussion,
as revenue less operating expenses and taxes.
Updated Mineral Reserves and
Resources
As compared to the mineral reserves in the 2015 Technical
Report, the mineral reserves in the 2017 Technical Report reflect
exploration success from the 2015 drilling campaign, as well as the
mining activities that took place in 2015 and 2016. Approximately
2.8 million tonnes and 6.7 million carats were added to the
year-end 2015 mineral reserves at the A-154 North pipe, through the
conversion of mineral resources to mineral reserves. The current
life of mine plan incorporates this increase in mineral reserves at
the A-154 North pipe. In 2015, approximately 6.4 million carats
were recovered, and in 2016, approximately 6.7 million carats were
recovered at the Diavik mine.
As of December 31, 2016, the Diavik mine had 16.3 million tonnes
of proven and probable mineral reserves containing 46.0 million
carats of diamonds, compared to 18.7 million tonnes of proven and
probable mineral reserves containing 52.8 million carats as of
December 31, 2015. The updated mineral reserves and mineral
resources statement reflects a decrease of 2.4 million tonnes
containing approximately 6.8 million carats, attributable almost
entirely to depletion.
During 2016, the mineral resource and reserve models were
updated based on surveying in active mining areas, confirmation of
orebody contacts located by underground drilling, and the results
of new samples taken. In addition, model grades were adjusted from
the results of production batches sole-sourced from A-154 South and
A-418 that were processed separately through the plant. In
anticipation of future production from the A-21 pipe, additional
drilling provided updated orebody geometry, internal geology and
grade estimation.
The tables below summarize the mineral reserves and mineral
resources at the Diavik mine as at December 31, 2016. Tonnes are
reported as millions of metric tonnes (Mt), diamond grades as
carats per tonne (cpt), and contained diamond carats as millions of
contained carats (Mct). The mineral reserves account for depletion
due to production and sampling to the end of December 31, 2016. The
values shown are on a 100% basis for the Diavik Joint Venture.
Table 1 – Mineral Reserves as at December 31, 2016 (100%
basis)
Pipe Proven Probable
Proven and Probable Mineral Reserve Mineral
Reserve Mineral Reserve Mt cpt Mct Mt
cpt Mct Mt cpt Mct A-154 North 3.6 2.4
8.5 4.6 2.3 10.8 8.2 2.3 19.3 A-154 South 0.3 3.2 1.0 0.7 3.7 2.8
1.1 3.6 3.8 A-418 1.8 4.1 7.5 1.9 3.1 6.0 3.7 3.6 13.4 A-21 3.3 2.8
9.4 --- --- --- 3.3 2.8 9.4 Stockpile 0.03 2.9 0.1 --- --- --- 0.03
2.9 0.1
Totals 9.1 2.9 26.4 7.3
2.7 19.5 16.3 2.8 46.0
Note: Totals may not add up due to
rounding
The mineral reserves estimate reflects a bottom screen size of 1
mm. Stockpiles are minor run-of-mine stockpiles that are maintained
at or near the process plant and are available to maintain blending
of kimberlite sources to the plant.
Table 2 – Mineral Resources(1) as at December
31, 2016 (100% basis)
Pipe
Measured
Indicated
Inferred
Mineral Reserve Mineral Reserve Mineral
Reserve Mt cpt Mct Mt cpt Mct Mt
cpt Mct A-154 North
---
---
---
---
---
---
0.5
2.3
1.1
A-154 South
---
---
---
---
---
---
0.4
2.8
1.2
A-418
---
---
---
---
---
---
0.2
2.5
0.5
A-21
---
---
---
0.4
2.4
0.9
0.8
3.5
2.7
Totals
---
---
---
0.4
2.4
0.9
1.9
2.9
5.5
Note: Totals may not add up due to
rounding
(1)
Mineral resources are reported exclusive of mineral
reserves, and represent material remaining after mineral reserves
have been removed for reporting separately elsewhere
The mineral resources estimate reflects a bottom screen size of
1 mm. The mineral resources have reasonable potential to be mined
but do not have mining losses and/or dilution applied at this time,
and as such they represent in situ values. Mineral resources that
are not mineral reserves do not have demonstrated economic
viability.
Updated “Reserves-Only” Life of Mine
Plan
The life of mine plan has been incorporated into the financial
and operating guidance for the fiscal year ending January 31, 2018,
as released by the Company on March 16, 2017. As such, there is no
change to the previously-announced guidance for the Company’s 40%
share of the Diavik mine.
Production
Between 2017 and 2025, 46.0 million carats are forecast to be
recovered from the processing of 16.3 million tonnes of ore.
Production will be sourced from three existing pipes at A-154
South, A-154 North and A-418, with production from the A-21 pipe,
which is currently in development, commencing in 2018. Production
will cease from the A-154 South pipe in 2019, followed by the A-418
pipe in 2021 and the A-21 pipe in 2023, with production from the
A-154 North pipe continuing until the end of the mine life in 2025.
Production figures do not include rough diamond stocks at the mine,
or any rough diamond inventory currently available for sale by the
Company. The tables below show the planned tonnes processed and
carats recovered for each pipe.
Table 3 – Tonnes Processed (millions) (100% basis)
Calendar Year A-154 South A-154
North A-418 A-21
Total 2017 0.46 0.75 0.94 - 2.18(1)
2018 0.36
0.83 0.91 0.21 2.30
2019 0.23 0.94 0.77 0.37 2.30
2020 - 0.95 0.75 0.60 2.30
2021 - 1.06 0.36 0.88 2.30
2022 - 1.13 - 1.17 2.30
2023 - 1.20 - 0.11 1.31
2024 - 1.23 - - 1.23
2025 - 0.12 - - 0.12
Total 1.05 8.20 3.74 3.32
16.34
Note: Totals may not add up due to
rounding.
(1)
Total ore processed in calendar 2017 includes 27,000 tonnes
of stockpile material containing an estimated 76,000 carats.
Table 4 – Carats Recovered (millions) (100% basis)
Calendar Year A-154 South A-154
North A-418 A-21
Total 2017 1.60 1.74 4.18 - 7.60(1)
2018 1.30
2.00 3.54 0.59 7.43
2019 0.85 2.24 2.69 1.17 6.95
2020 - 2.18 2.17 2.30 6.65
2021 - 2.47 0.85 2.47 5.78
2022 - 2.64 - 2.70 5.34
2023 - 2.87 - 0.21 3.08
2024 - 2.85 - - 2.85
2025 - 0.27 - - 0.27
Total 3.75 19.26 13.43 9.44
45.96
Note: Totals may not add up due to
rounding
(1)
The total carats recovered in calendar 2017 include an
estimated 76,000 carats from the processing of 27,000 tonnes of
stockpile material.
In addition to the current mineral reserves, there are 1.9
million tonnes of inferred mineral resources, of which 1.1 million
tonnes (in the aggregate) are distributed among the lower portions
of A-154 South, A-154 North and A-418. The operator of the Diavik
mine, DDMI, currently expects to process this material as part of
its mining operations as they reach the lower levels of each pipe.
However, inferred mineral resources are considered too geologically
speculative to have economic considerations applied to them that
would enable categorization as mineral reserves, and there is no
certainty that they will be mined. Therefore, they have not been
included in the above mine plan. Mineral resources that are not
mineral reserves do not have demonstrated economic viability.
The incremental 6.3 million carats recovered from 2017 to the
end of the mine life are forecast to be mined primarily from the
A-154 North pipe, which has the highest average carat value amongst
the kimberlite pipes at Diavik.
Diamond Prices
Using the prices realized in the Company's recent sales history,
price forecasts for the future A-21 pipe, and the current diamond
recovery profile of the Diavik processing plant, the Company has
modelled the approximate rough diamond price per carat for the
kimberlite pipes at the Diavik mine.
Table 5 - Modelled Diamond Prices by Kimberlite Pipe
Diavik Kimberlite Pipe 2016 Average Price per
Carat
(US dollars)
A-154 South
$126 A-154 North
$166 A-418
$90
A-21
$126
Capital and Operating Costs
Operating costs over the remaining life of the mine are forecast
to total approximately $2.8 billion. Given the remote location
of the Diavik mine, a large portion of the operating expenditure is
fixed, with the major cost items being human resources and
fuel.
Development capital, which totals approximately $173 million
including contingencies, relates to the development of the A-21
pipe that is forecast to enter production in 2018. Sustaining
capital over the life of mine is forecast to total approximately
$216 million.
Table 6 - Capital and Operating Costs ($millions)
(100% basis)
Calendar Year Development Capital
Sustaining Capital Total Capital
Operating Costs 2017 95 47 142 334
2018 64 42
106 348
2019 14 49 63 385
2020 - 36 36 374
2021 - 33 33 352
2022 - 6 6 331
2023 - 2 2 296
2024 - 2 2 276
2025 - - - 137
Total 173
216 389 2,832
Note: Totals may not add up due to
rounding
Excluded from capital and operating costs are marketing costs,
royalties payable to the government of the Northwest Territories,
private royalties and $165 million of estimated reclamation costs.
The majority of reclamation costs are expected to be incurred
between 2024 and 2028.
Forward-Looking Information
Information included herein that is not current or historical
factual information, including information about estimated mine
life and other plans regarding mining activities at the Diavik
Diamond Mine, estimated mineral reserves and resources at, and
production from, the Diavik Diamond Mine, projected capital and
operating costs, and future diamond prices, constitute
forward-looking information or statements within the meaning of
applicable securities laws. Forward-looking information can
generally be identified by the use of terms such as "may", "will",
"should", "could", "expect", "plan", "anticipate", "foresee",
"appears", "believe", "intend", "estimate", "predict", "potential",
"continue", "objective", "modelled", "hope", "forecast" or other
similar expressions concerning matters that are not historical
facts. Forward-looking information is based on certain factors and
assumptions including, among other things, mining, production,
construction and exploration activities at the Diavik Diamond Mine;
mining methods; currency exchange rates; estimates related to the
capital expenditures required to bring the A-21 pipe into
production, required operating and capital costs; labour and fuel
costs; world and US economic conditions; future diamond prices; and
the level of worldwide diamond production. These assumptions may
prove to be incorrect. 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 Diavik Diamond Mine,
risks resulting from the Eurozone financial crisis, 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. Due to assumptions, risks and
uncertainties, including the assumptions, risks and uncertainties
identified above and elsewhere in this disclosure, actual events
may differ materially from current expectations. The Company uses
forward-looking statements because it believes such statements
provide useful information with respect to the currently expected
future operations and financial performance of the Company, and
cautions readers that the information may not be appropriate for
other purposes. 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, future 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.
Qualified person
The scientific and technical information contained in this press
release has been prepared by Diavik Diamond Mines (2012) Inc.,
operator of the Diavik Diamond Mine, under the supervision of
Calvin Yip, P. Eng., Principal Advisor, Strategic Planning of
Diavik Diamond Mines (2012) Inc., and a Qualified Person within the
meaning of National Instrument 43-101 of the Canadian Securities
Administrators.
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, or
contact:
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170331005869/en/
Dominion Diamond CorporationJacqueline Allison, (416)
205-4371Vice-President, Investor
Relationsjacqueline.allison@ddcorp.ca
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