From Will P Stockwatch
ond & Specialty Minerals Summary for June 11, 2019
2019-06-11 16:44 PT - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Tuesday was a mediocre 64-80-156 as the TSX Venture Exchange fell five points to 589 and polished diamond prices were flat. No news is bad news in the diamond sector and some days, good news appears even worse. Star Diamond Corp. (DIAM) dipped to an intraday low of 19 cents, ending the day unchanged at 20 cents on 557,000 shares. Despite a dearth of news, Star's stock had remained above the 20-cent mark for months, but word last week that a big bulk sample at the Star pipe in Saskatchewan is finally under way set off a new wave of selling.
Patrick Godin's -- and increasingly the creditors' -- Stornoway Diamond Corp. (SWY) slumped to a new low of 1.75 cents, ending the day down one cent to two cents on 127.2 million shares. The latest decline comes on word that Stornoway has arranged an $11.7-million, 8.25-per-cent-per-year bridge financing and has renegotiated the terms of some of its crushing debt while the company works to get its Renard diamond mine in Quebec on track. The bridge financing is being provided by Diaquem Inc., a corporate arm of the Quebec government. As well, other creditors have agreed to provide nearly $6-million more. Further, most of the company's major lenders have agreed to postpone interest payments for the second half of the year.
This latest stopgap effort is an interim step to avoid bankruptcy -- or in the company's less harsh words, to "ensure the corporation continues to operate uninterrupted" -- while it pursues a "strategic review process" designed to seek out and pursues a restructuring transaction. Mr. Godin, who may regret taking over from Matt Manson as president and chief executive officer in January, says that the strategic review process that he began earlier this year is aimed at ensuring the long-term viability of the Renard mine. He is purportedly seeking a willing buyer, if no well-heeled (and risk-loving) investor steps up.
Stornoway's stock traded as high as $1.34 in the fall of 2016, just as the company was gleaning the first batches of diamonds from its then new, $800-million mine. At the time, with Stornoway putting together parcels of diamonds for its inaugural sale, Mr. Manson reminded investors that a 2013 "optimized feasibility study" and a 2016 valuation had projected Renard's production at 1.8 million carats per year and $155 (U.S.) per carat.
Reality was not good: Last year, Renard sold just 1.32 million carats worth barely $92 (U.S.) per carat, and as a result, the company racked up a $330-million loss. The situation was little better in the first quarter of 2019 as Stornoway lost nearly $50-million, selling just under 430,000 carats at $83 (U.S.) per carat. The numbers suggest that finding a buyer or a backer driven by a profit motive will prove challenging