Dominion Diamond Corporation Reports Fiscal 2017 Second Quarter Results

YELLOWKNIFE, Northwest Territories–(BUSINESS WIRE)–Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the “Company” or “Dominion”) today reported its second quarter 2017 (May through July) financial results.
The press release reviewed the following results in American dollars:
Sales 160.0 209.7 338.2 397.4
Gross Margin 0.9 22.7 (18.0) 46.8
Mine standby costs 22.0 — 22.0 —
Operating (loss) Profit (30.3) 7.6 (57.2) 23.0
Profit (loss) before income taxes (37.9) 0.6 (73.8) 9.1
Adjusted EBITDA(1) 35.4 60.4 89.7 121.2
Free Cash Flow(1) (20.9) 22.9 (110.9) (70.7)
Earnings (loss) per share (“EPS”) (0.39) (0.21) (0.40) (0.07)
First sales of Misery Main production. Commercial production at Misery Main was declared in May 2016, ahead of plan. First sales of pre-commercial production occurred in the second quarter of fiscal 2017 and confirmed modelled prices.
Ekati process plant update. The Company currently expects the process plant to restart on or about September 21st at an estimated total cost of repair of $15 million. The process plant shutdown negatively impacted earnings and cash flow in the period. The Company expensed $22.0 million of mine standby costs as a result of the fire in the second quarter.
Transitional period at Ekati continues to impact earnings. The transitional period ahead of the sale of the first Misery Main commercial production continued to impact margins at Ekati and resulted in a $6.4 million impairment of available for sale inventory in the period.
Positive Jay Feasibility Study approved. The Jay Feasibility Study was approved by the Board of Directors and a decision to proceed with development was made based on positive project economics. The Jay Project provides a platform for future growth at Ekati and development is expected to be funded from existing cash and internally generated cash flows.
Well positioned for growth. The Company maintains a strong balance sheet to support the payment of a regular dividend and the substantial capital requirements to advance the Lynx, Sable, Jay, and A-21 projects.
Office building sale. The sale of the Company’s downtown Toronto office building for CDN $84.8 million which was completed September 8th, enhances the Company’s strong balance sheet and supports its revised capital allocation strategy.
Dividend declared. Interim dividend of $0.20 per share declared by the Board of Directors.
“We are very pleased to announce the sale of the first production from Misery Main, which provides confirmation of our modelled pricing and has given us even more confidence in the positive cash flow impact of Misery Main through the next phase of the Ekati mine,” said Brendan Bell, Chief Executive Officer. “While the process plant fire and the final stage of the transitional period at Ekati weighed on our earnings and cash flow in the quarter, we are encouraged by our ability to generate positive operating cash flow even under these circumstances.”
“During the quarter we also published a positive feasibility study for the Jay Project and outlined a revised capital allocation strategy, which is underpinned by our strong balance sheet and strong cash flow generation capabilities,” added Mr. Bell.