TORONTO (miningweekly.com) – The NYSE-quoted stock of Canadian diamond producer Dominion Diamond Corp on Thursday rose more than 7% to $11.64 apiece after the company late on Wednesday reported a net loss that beat analyst expectations.
The Yellowknife, Northwest Territories-headquartered miner, which owns an 89%-stake in the Ekati mine and is in a 40/60 joint venture partnership with mining major Rio Tinto at the Diavik mine, reported a net loss attributable to shareholders in the quarter ended April 30, of $1-million, or $0.01 a share, compared with a net income of $12-million, or $0.14 a share diluted, a year earlier.
Wall Street analysts had, on average, expected a loss of $0.10 a share.
Dominion reported a 5% year-on-year decline in revenue to $178.3-million. It explained that, despite declaring commercial production at the Misery Main kimberlite pipe ahead of schedule in May, as a result of changes to the prioritisation of mining activities during the quarter, the transitional period at Ekati continued to impact on earnings.
However, CEO Brendan Bell expected Misery Main to provide significant cash flow and a positive contribution to earnings in the second half of the year.
“We are very pleased to announce the commencement of commercial production at Misery Main, ahead of schedule," he said.
Still, the transitional period ahead of Misery Main commercial production continued to impact on margins at Ekati and resulted in a $19.6-million impairment of available-for-sale inventory in the period, Dominion advised.
“We will also end this transitional period at Ekati with a strong balance sheet. We have determined that we can maintain continuous production at Ekati without starting major construction at Jay this year, and we are incorporating this new construction schedule into our Jay feasibility study, which we expect to release the results of shortly.”
Dominion noted that, despite the impact of the transitional period, it had retained a strong balance sheet for funding payment of a regular dividend and the substantial capital requirements to advance the Lynx, Sable, Jay and A-21 projects.
The company expected to spend $38-million in sustaining capital for Ekati and $17-million for Diavik. Development capital expenditures were forecast at $182-million for Ekati and $41-million for Diavik.
Dominion commented that conditions in the rough diamond market during the first quarter improved significantly, as inventories were replenished by manufacturers in response to a positive retail season at the end of 2015. Prices had recovered and ended the first fiscal quarter about 8% higher, on average, than at the start of the financial year.
As a result, Dominion advised, the downward pressures on prices faced last year were reversed, which augured well for more stable market conditions in fiscal 2017.
The US jewellery market was at the forefront of demand growth during the period and, despite the impact of uncertain economic growth on sentiment, sales in mainland China remained reasonably steady. Conversely, the Hong Kong and Macau markets faced considerable headwinds, the company stated.