From Will P, Stockwatch Matt Manson's Stornoway Diamond Corp. (SWY), up two cents to $1.04 on 3.27 million shares, has come from behind to become Canada's next producing diamond mine. Last week, Stornoway declared its Renard mine in the Otish Mountains of Quebec to be in commercial production. Its main competition, Patrick Evans's Mountain Province Diamonds Inc. (MPV: $6.01) and De Beers Canada, say that production will commence at their Gahcho Kue mine in the Northwest Territories within the next few months. Renard, a project discarded by a major and acquired by a junior, also handily beat Gahcho Kue, discovered by a junior and now operated by a major, in the time to production: Renard, discovered in 2001, took 15 years to achieve production; Gahcho Kue, discovered in 1995, will have taken 21 years.
Mr. Manson has also outperformed Mr. Evans in the art of promising small and delivering large, as Renard has come in significantly ahead of schedule and under budget while work at Gahcho Kue was largely in line with projections. Stornoway's 2011 feasibility study put the capital cost of Renard at $802-million, and when the company began construction in the summer of 2014 the cost had increased to just $811-million with first production slated for the spring of 2017. Stornoway now puts the cost of Renard at just $775-million and it shaved nearly a year off the construction timeline.
The 2010 feasibility study for Gahcho Kue put the capital cost of the mine in a range between $550-million and $650-million, although De Beers subsequently tacked on another $100-million to those numbers within a year. By the time construction began in earnest in early 2014, the budget had ballooned to $1-billion and first production was expected in September, 2016. While Mountain Province appear likely to achieve their production target, the budget has since inched closer to $1.1-billion.
Renard also has a shot at delivering more diamond revenues than Gahcho Kue. The latter mine has a total resource of 56.6 million carats indicated and another 18.5 million inferred, and based on the feasibility study model of $118 (U.S.) per carat, those gems have a gross value of $8.9-billion (U.S.). (Mr. Evans and his Mountain Province crew still tout an in-situ value of greater than $20-billion (U.S.), but to do so, they need a "spot price assumption" of $172 (U.S.) per carat and a liberal numerical interpretation of the "to be determined" valuation of hypothetical resources in "other" and "new" targets.)
Meanwhile, Stornoway financed and built its mine with a reserve of just 18 million carats valued at $190 (U.S.) per carat, an in-situ value of just $3.4-billion (U.S.). Renard has considerable upside, with a resource of 30.2 million carats indicated and another 13.35 million inferred. Further, the company has a target for further exploration of between 33 million and 71 million carats more. That suggests the possibility of 85 million carats, perhaps with an in-situ value topping $15-billion (U.S.). Of course, the immediate challenges for both Renard and Gahcho Kue will be proving their diamond valuations are accurate -- and showing that they can indeed mine their hypothetical carats.