Forest fire threatens Stornoway diamond mine

Stornoway Diamond Corp.  [SWY-TSX; SWYDF-OTC] said it has suspended operations at its Renard diamond mine in the James Bay region of Quebec due to a forest fire in the region. As of 6:30 a.m. on Monday July 2, the fire covered an area of 18 by 6 km and was located south of the mine, fanned by northerly winds. While the mine facilities were not immediately in danger, the fire was less than 4 km south of the mine’s landing strip and within 0.1 km of the mine access road.

Stornoway has evacuated non-essential staff and road deliveries have been suspended as a precautionary measure until safe working conditions can be re-established. While it’s unclear at this point how long the suspension will last, Stornoway notes that rain and a change in the wind direction was forecast within the next 24 to 48 hours.

Stornoway shares eased 4.55% or $0.02 to 42 cents on Monday. The 52-week range is 84 cents and 42 cents.

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 the Chibougamau, north-central Quebec.

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 year over the first 10 years of mining.

Stornoway President and CEO, Matt Manson, said the company’s recent financial results reflect the transitional nature of the company’s business as it moves from open pit to underground mining. During this transition, carat production is being negatively impacted by the processing of lower grade ore available in stockpiles and the first underground stopes.

This prompted the company to reduce its full year production and sales guidance. However, by the end of the second quarter of 2018, the Renard Mine will have fully transitioned to underground mining supported by ore sorting. It means that major capital spending on the project will have been completed.

In the first quarter ended March 31, 2018, Stornoway reported a net loss of $11 million  or $0.01 per shares, compared to a net loss of $1.2 million ($0.0 per share) in the same period last year.

During the first quarter, three tender sales, totalling 399,135 carats were completed, generating gross proceeds of $56.6 million at an average price of US$112 per carat. Revenue recognized was $55.9 million, derived from the sale of 271,518 carats of run of mine production from two tender sales at an average price of US$106 per carat. Revenue from a third tender sale will be recognized in the second quarter the company has said.