During the quarter the Corporation commissioned a modified method for the handling and disposal of processed kimberlite ("PK"). From the start of ore processing, PK had been de-watered with centrifuges for trucking to a dry-stack disposal site. High moisture content in the PK reduced its competence for stacking, and made disposal cumbersome. Under the modified disposal system, fine PK will be pumped for disposal into a modified containment facility, with water outflow collected and recirculated to the plant or treated at the existing water treatment facility. A degrit module has been installed in the process plant and civil works modifications completed at the containment facility to accommodate the disposal of the coarse PK. A modification to the mine's operating permit in support of these changes was received on scheduled, and the new PK handling and disposal method has been operating successfully since the beginning of the quarter.
In early August, the Corporation's Board of Directors approved an extraordinary capital expenditure of $22 million for a program of plant improvement aimed at improving the quality profile of Renard production, to be funded from existing financial resources. At the centre of this plan is the introduction of an ore-waste sorting circuit rated at 7,000 tonnes of ore per day, and expandable, designed to extract waste in the +30mm-200mm size range immediately prior to its introduction to the secondary cone crusher. The ore-waste sorting circuit will include covered conveyors, a gravity fed tower containing primary, secondary and scavenging spectral sorters, and a waste rock load out. Work on the concrete foundations began in August, and all steel work and enclosures are schedule to be completed by year end. Commissioning is schedule for the first quarter of 2018. In addition to an improved diamond size and quality profile through diamond breakage mitigation, the addition of this circuit is expected to have an ancillary benefit of reducing load on the rest of the Renard process plant, allowing for future potential plant expansion.
Commentary on Diamond Production and the Rough Diamond Market
Since ore processing at Renard began, diamond production has been influenced by: (1) Better than expected head feed grades derived from a positive geological reconciliation of ore units in the open pits and the underground mine development levels; (2) High levels of diamond breakage impacting the size distribution, quality and grade of diamonds recovered; (3) Higher than expected production of small (-3mm) diamonds derived from a more efficient diamond liberation in crushing and processing than was anticipated; (4) a positive response to Renard diamonds in the rough market demonstrated by a real terms increase (after accounting for size distribution and quality variations) of 19% between the first sale in November 2016 and the seventh in July 2017; and (5) Changing market conditions for certain diamond categories such as smaller and lower quality items which were severely impacted by the Indian demonetization events of late 2016 and for which prices have not yet fully recovered. The positive grade reconciliation experienced at the Renard Mine to date, and the lower than expected pricing at sale, is the net result of each of the above factors.
Stornoway believes that significant value improvement will be achieved with the successful mitigation of the diamond breakage to more acceptable levels. During the first half of 2017, steps were undertaken to understand the cause of the breakage, with attention focussed on crusher operating settings, material balancing in the plant, pumps, ore recirculation and screens. Progress was measured with diamond breakage studies and simulant testing, and diamond breakage conditions were replicated in laboratory bench tests. Following this work, the source of the breakage has been localized, primarily, within the secondary cone crusher and tertiary high pressure grinding roll crusher, and appears associated with the high proportion of hard, internal dilution inherent in Renard ore producing an abrasive environment within the crushers. The Corporation believes that the introduction of ore-waste sorting under the extraordinary capital plan approved by the Board of Directors will contribute to a higher quality, and potentially higher grade, diamond product through the removal of a large proportion of the abrasive dilution from the crushing circuits.
At the same time, Stornoway will seek to continue the better than expected liberation of small (-3mm) diamonds as a source of incremental revenue above that contemplated in the project's Mineral Resources.
Conference Call and Webcast
Stornoway will host a third quarter earnings conference call for analysts and investors on November 3, 2017 at 1100am EST. This call may be accessed by calling 1-844-215-3287 toll free in North America, of 1-209-905-5939 from international locations, with Conference ID 2499129. A live webcast of the call will be available at https://edge.media-server.com/m6/p/nyed2trz. A replay of the call, and a copy of the earnings presentation, will be made available on the Stornoway website at www.stornowaydiamonds.com.