From Will P stockwatch Matt Manson's Stornoway Diamond Corp. (SWY), unchanged at 73 cents on 225,000 shares, has revised its two-year-old resource estimate while it builds its big Renard diamond mine in the Otish Mountains of Quebec. The $850-million mine is based on a reserve containing just 18 million carats, but there are many more carats available now. Stornoway now lists 42 million tonnes indicated at 0.71 carat per tonne, a total of 30.2 million carats, with another 24.5 million tonnes inferred at 0.54 carat per tonne, for another 13.4 million carats. All told, Stornoway has now delineated its key pipes sufficiently to declare a cumulative 43.5-million-carat resource.
Further, its continued exploration continues to produce additional amounts of kimberlite within a less-defined "target for further exploration." Stornoway has between 59 million and 88 million tonnes of material at varying grades that could host an additional 27.8 million to 59.7 million carats. The regulators frown on adding indicated and inferred resources and they undoubtedly abhor combining resources with target tonnages. Nevertheless, any investor doing the math -- as most of them eagerly do -- arrives at a best-case scenario whereby Renard could host just over 100 million carats, 20 million more than the 2013 estimate contained. That would put Renard's scale in the same league as Diavik and Ekati, where Dominion Diamond Corp. (DDC: $13.40) has been operating larger mines than Stornoway is building.
The carat tally remains substantial even if the counts are limited to just the two main pipes that Renard will mine first. At Renard-2, Stornoway has 21.6 million carats indicated, 3.9 million inferred and as much as 15.5 million more not yet deemed a resource. Renard-3 hosts 20.4 million carats indicated, 610,000 inferred and up to 6.4 million more in a target needing further drilling. The confirmed resources alone amount to over 46 million carats, nearly triple the current mining reserve.
The new estimate therefore leaves Mr. Manson with a problem, although it is one all promoters would love to have. Stornoway's Renard mine, just a year from production, will be capable of processing 6,000 tonnes of kimberlite per day, a rate that would take 11 years to chew through the reserve. To process the entire resource will now require 30 years -- and as much as 40 years more to glean the still uncertain diamonds in the target for further exploration. The company can boost the processing rate somewhat -- to 7,000 tonnes per day -- but a more meaningful expansion will require a significant capital expenditure. For now, Mr. Manson seems content to leave his new mine as it is. He touts the "long mine life" of the project, adding that production would continue long past the projected 11-year life based on the reserve estimate.