The share price of Quebec diamond miner Stornoway Diamonds took a beating on Tuesday, after the company unveiled a net loss of C$35.9-million for the second quarter and said that the ramp-up of its underground mine at Renard was slower than planned.

Stornoway’s share price dipped to a 12-month low at C$0.38 a share before crawling back to C$0.40 a share when the market closed, leaving the stock down nearly 7% on the previous day’s closing price.

President and CEO Matt Manson said that the second-quarter results, which included an adjusted net loss of C$31.3-million and an adjusted loss before interest, taxes, depreciation and amortisation of C$31.3-million, was the result of the continuing transition to underground mining at Renard and the accompanying lower carat recoveries and sales during the first half of the year.

The Renard mine recovered 223 351 ct in the June 2018 quarter, compared with 417 362 ct in the prior-year quarter. Stornoway sold 370 878 ct in the quarter under review, which is more than the 350 159 ct sold a year earlier. Revenue increased to C$56.9-million, from C$42.6-million, and includes C$13.5-million recognised from the contract liabilities related to the upfront proceeds received under the Renard stream agreement.

The net loss reflected a C$18.3-million write-down to bring stockpile, work-in-progress and finished goods inventories to their net realisable value.

“Ramp-up of the underground mine has been slower than expected, but by the end of July subsequent to the quarter-end, we had established sufficient drawpoints, equipment availability and manpower levels to achieve mining rates at or above our underground design capacity,” Manson said in a statement accompanying the results.

He stated that Stornoway expected better carat recoveries and larger sales in the second half of the year, but cautioned that achieving the 2018 production guidance – which had been lowered in May – would depend on maintaining the current production levels and budgeted grade for the remainder of the year.

The company’s production guidance for the year is between 1.35-million and 1.40-million carats, while the sales guidance is between 1.20-million and 1.25-million carats.

Manson said that the construction of the Renard mine, the ramp-up of processing, the introduction of ore-sorting, and the construction and ramp-up of the underground mine had been achieved with the capital structure established in its original 2014 construction funding. However, sales revenue during this period had been less than initially forecast, resulting in lower-than-expected financial liquidity and cash flow. Consequently, Stornoway went back to its lenders and key stakeholders to amend financing agreements in order to have greater financial flexibility and sufficient working capital.

“These discussions have been positive and are currently ongoing,” he reported.