Stornoway targets up to C$20m in cost reductions to preserve liquidity

Canadian miner Stornoway Diamond Corporation has initiated a series of actions to preserve its liquidity, including targeted cost reductions of C$18-million to C$20-million this year.

The miner, which operates the Renard mine in Quebec, said on Monday that the continued downward pressure on the rough diamond market was inhibiting its ability to generate positive free cash flow.

In addition to the cost-saving initiatives, Stornoway has also started a strategic review to consider “all options” and has entered into “active discussions” with its financial partners to secure the corporation’s long-term financial viability.

Stornoway widened its a net loss to C$48.4-million in the first quarter of 2019, compared with a net loss of C$11-million in the prior-year period.

Revenue for the period fell to C$53.34-million, from C$55.95-million. During the quarter, two tender sales totalling 429 506 ct were completed for gross proceeds of C$47.3-million at an average price of $83/ct.

In terms of total carats sold, gross proceeds and pricing, this represents increases of 38%, 47% and 8%, respectively, were recorded,  compared with the fourth quarter of 2018.

The company’s diamond production in the reporting period was 444 562 ct, at an average grade of 76 carats per hundred tonnes. However, carats recovered decreased by 8% compared to the fourth quarter of 2018, mainly owing to mechanical issues at the front end of the process plant related to excessive cold weather in January and February.

Production picked up again in March, when the process plant surpassed its budgeted daily rate with an average of 7 209 t/d processed. In April, the company recorded an average processing rate of 7 734 t/d, which was the record highest monthly processing performance from Renard.

CEO and president Patrick Godin said that underground development of the next mining horizon at the Renard 2 operations was progressing according to plan, while the initiation of underground production at Renard 3 started late in April.

While Stornoway faced liquidity challenges, the company affirmed that the Renard mine was performing in accordance with plan and that management was continuing to make improvements to support the operation’s long-term viability.