Stornoway completes diamond mine ramp-up

Stornoway Diamond Corp.  [SWY-TSX; SWYDF-OTC] said Tuesday September 4 that it achieved full mine design capacity of 6,000 tonnes per day at its Renard diamond mine in Quebec for the 20-day period ended August 29, 2018.

Management had previously noted with the company’s second quarter 2018 release and conference call that it had reached 6,000 tonnes per day (tpd) for periods of time during the third quarter. But Monday’s announcement confirms that the company has been able to sustain that rate after suffering some challenges in the second quarter caused by longer lead times on mobile equipment and lack of drawpoint access.

Underground ore production is now being sourced from 16 drawpoints on four mining panels on the 290-metre level of the R2 kimberlite. The company said grade has continued to improve as mining moves into the less diluted ore in the core of the deposit.

Additionally, ore processed averaged 7,085 tpd during the 20-day period (including 1,000 tpd of feed from the R65 open pit), exceeding design capacity of 7,000 tpd.

Stornoway shares eased 1.43% or $0.005 to 34.5 cents Tuesday. The 52-week range is 80 cents and 33.5 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 in the James Bay region of 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 has said 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 was 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 had fully transitioned to underground mining supported by ore sorting. It means that major capital spending on the project has been completed.

On Tuesday, Manson said completion of the underground mine ramp-up at Renard is a validation of the design of the project, the quality of the Renard orebodies, and the dedication of the Renard mining team and contractors.

“The assisted block cave is developing well, and as expected, the grade of diamond recoveries has increased as we have moved from the initial mining panel at the margin of the Renard 2 into the panels closer to the centre of the orebody,” he said.

Stornoway is engaged with its lenders and other stakeholders to modify the terms of its existing financial arrangements to provide greater flexibility, pending attainment of positive free cash flow (expected in 2019). The company’s lenders recently provided a deferral of $10 million in principal payments and a waiver of certain covenants until September 30, 2018.

The company expects to provide a further update prior to the end of the current quarter.