Few days old from Will P..SW Matt Manson's Stornoway Diamond Corp. (SWY), unchanged at 57 cents on 1.02 million shares, is making progress with its diamond breakage problems at its Renard mine in Quebec. The company sold nearly 139,000 carats for $14.4-million (U.S.), an average of $104 (U.S.) per carat, in its first sale of 2018. This is the highest price achieved so far, says Mr. Manson, president and chief executive officer. Stornoway averaged just $86 (U.S.) per carat during its two sales in the fall. During the third quarter, it averaged $95 (U.S.) per carat, up from $87 (U.S.) per carat in the spring quarter and the $81 (U.S.) per carat that it achieved through the first quarter of 2017.
Mr. Manson attributed the higher price in part to a strengthening rough diamond market, but he said that less diamond breakage, a stronger size distribution profile and the quality mix of the diamonds recovered contributed to the higher price. He says that the 97,300 carats of diamonds larger than three millimetres sold for $140 (U.S.) per carat, near the midpoint of the projected range of $125 (U.S.) to $165 (U.S.) per carat for 2018, while the 41,400 carats of smaller diamonds sold for an average of $21 (U.S.) per carat, topping the predicted range of $17 (U.S.) to $19 (U.S.) per carat.
Still, the Renard rough diamond prices are far below earlier estimates. In 2011, Stornoway's feasibility study projected a value of $182 (U.S.) per carat for the Renard-2 and Renard-3 gems now being mined. A revised plan, prepared in early 2016, cut the estimate to $139 (U.S.) per carat but through 2017, Renard has been averaging just $87 (U.S.) per carat. Much of that decline is beyond the company's control, as rough diamond prices are about 30 per cent lower than their 2011 highs. (Mountain Province Diamonds Inc. (MPVD: $3.44) averaged just $65 (U.S.) per carat in its latest sale of Gahcho Kue diamonds, far below the 2011 estimate of nearly $140 (U.S.) per carat.)
Meanwhile, the size distribution profile of the gems sold in January appears to be about as expected, Mr. Manson's pleasing comments aside. About 70 per cent of the carats sold in January were contributed by diamonds larger than three millimetres, nearly in line with the 68 per cent predicted in Stornoway's 2018 guidance. Meanwhile, large diamonds remain relative rarities at Renard: Stornoway sold just 24 special gems -- stones weighing more than 10.8 carats -- in January, and none were particularly large or valuable, as those gems averaged just $3,210 (U.S.) per carat.
The plant woes and the depressed rough diamond market notwithstanding, Stornoway has been doing better than projected at getting kimberlite to the plant. From the mine's opening in mid-2016 and through last year, the typical ramp-up time when all sorts of teething problems crop up, Stornoway processed 2.35 million tonnes of kimberlite, compared with its target of 2.22 million tonnes. The grade was also slightly higher despite the breakage issues that inevitably would have turned some of the production into unrecoverable dust. The mine averaged 0.89 carat per tonne, compared with its target of 0.86 carat per tonne, resulting in production of 2.09 million carats, about 180,000 more than expected.