Stornoway Reports Loss Amid Renard Delays

RAPAPORT... Stornoway Diamond Corporation went into the red in thesecond quarter as delays at its Renard mine resulted in lower-quality productionthan it had anticipated. The miner recorded a net loss of $27.4 million (CAD 35.9million) for the three months ending June 30 as Renard's shift to undergroundmining has taken longer than the company expected, Stornoway said Tuesday. "Our second-quarter results reflect the continuingtransition to underground mining at Renard, and the accompanying lower-caratrecoveries and sales during the first half of the year," Stornoway CEO MattManson said. "Ramp-up of the underground mine has been slower than expected." The miner originally stated that the transition tounderground mining would be complete by the end of the second quarter. However,issues with equipment availability and management problems have impeded theprocess. While revenue increased 34% to $43.5 million (CAD 56.9million) for the quarter, it was lower than the company hadforecast, resulting in weaker-than-expected liquidity. The revenue figure is higherthan the gross sales the company reported in a trading update a month ago, as the full amount includes proceeds from a first-quarter sale that it received inthe second quarter. It also includes revenue from an agreement under whichStornoway sells future production to clients at a pre-set price. During the second quarter, the miner sold 328,899 carats foran average of $115 per carat, and a further 41,979 carats for an average priceof $19 per carat. Although the overall average price has increased from the same timelast year, Stornoway has not yet reached its target of $125 to $165 per caratfor 2018. This year was Stornoway's first year of full operation. The companyreached commercial production at its Renard asset in December 2016. Stornoway expects higher-quality carat recoveries in thesecond half of the year, Manson said, as the company moves into the centralmining areas, which contain higher-grade ore. In May, the miner reduced its production-and-salesexpectations for the year from its original estimate of 1.6 million carats tobetween 1.35 million and 1.4 million carats. The company's ability to meet thatrevised expectation will depend on its maintaining current production levels andbudgeted grade for the rest of the year, Manson added. Stornoway's stock price fell 7% Tuesday after the company announcedits earnings.