News of the shortfall impacted shares of the company, which were down by 9 percent following the announcement.
The second quarter of 2019 proved challenging for junior diamond miner Stornoway Diamond (TSX:SWY,OTC Pink:SWYDF) as the company posted a quarterly net loss of C$346.3 million.
Despite reporting revenues of C$189.4 million for the quarter ended June 30, 2019, news of the shortfall impacted shares of the company, which were down by 9 percent following the announcement.
This is the second consecutive quarter that the company, which operates the Renard diamond mine in Quebec, has posted a net loss. During the first quarter Stornoway reported a net loss of C$48.4 million.
Q2’s more than C$300 million loss has been attributed to a non-cash impairment charge of C$442.7 million.
According to the company, the impairment is correlated to the decreasing price of rough diamonds which resulted in a write-down of property plant and equipment, right-of-use assets and deferred transaction costs.
Stornoway is currently looking for a buyer or major investor and has extended the deadline for bids from July 15 to September 15. At present, the diamond miner is relying on bridge financing to cover the cost of operations.
Although the Renard 65 open pit mining was temporarily suspended at the beginning of the quarter, production surpassed the previous quarter.
“Production during the second quarter at our Renard mine exceeded the results of the first quarter: ore processed was up 19 percent and at an all-time high, and carats recovered were up 4 percent quarter-on-quarter,” CEO Patrick Godin said.
Streamlining of company operations helped increase the production numbers, as Goodin explained.
“This is mainly due to an increase in the utilization factor of the Renard process plant, as we had experienced challenges due to very cold weather in the course of the first quarter and have improved the efficiency of preventive maintenance shutdowns.”
While output increased for the Quebec-based miner, the value of the gems when brought to tender slipped 9 percent. 460,832 carats were sold in two tenders during Q2, with an average carat price of US$76. In total, the two sales brought in C$46.8 million.
“The diamond market continued to show significant weakness, with average prices further declining from already low levels,” Goodin added.
The Renard mine is the province’s first diamond mine and has been in commercial production since 2017. The project has an annual diamond production forecast of 1.8 million carats for the first decade.
Shares of Stornoway were down 18.17 percent on Thursday (August 15), trading at C$0.02.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.