Quebec diamond miner Stornoway has announced a series of financing transactions, totalling $129-million, with lenders and key stakeholders to provide greater financial and operational flexibility.
The financing package is made up of a deferral of certain loan principal repayments for a 24-month period, representing debt service cost deferral of up to C$54-million; amendments to the Renard diamond streaming agreement comprising and a private placement.
“The combination of reduced debt costs and new capital has been designed to greatly strengthen our balance sheet for the long term, while at the same time being sensitive to shareholder value. With major capital expenditures at Renard behind us and our underground mine now fully ramped up, this comprehensive deal allows our team to now focus fully on bringing forward the operating and cash flow potential of the business,” president and CEO Matt Manson said on Tuesday.
In terms of the amended Renard streaming agreement, Stornoway amended and restated the purchase and sale agreement with Osisko Gold Royalties, Caisse de dépôt et placement du Québec, Triple Flag Mining Finance Bermuda, Albion Exploration Fund and Washington State Investment Board, pursuant to which the buyers have paid Stornoway the US dollar equivalent of C$45-million in gross cash proceeds as an additional up front deposit to Stornoway’s subsidiary, FCDC Sales and Marketing.
The buyers will continue to purchase a 20% undivided interest in all diamonds produced from the Renard mining property for the life of the mine and, upon the completion of a permitted sale of diamonds, they will remit to Stornoway, in cash, the lesser of 40% of achieved sales price or $40/ct, with the balance of purchase price payable by the buyers, if any, being paid by way of offset against the up-front deposits.
Previously, the Renard stream provided for a sale of an undivided interest in 20% of all diamonds produced from the first five project kimberlites to be mined at Renard for the life of mine, and the first 30-million carats from the property overall, with the buyers remitting to Stornoway, in cash, $50/ct, escalating at 1% a year annum, with the balance of purchase price payable by the buyers, if any, being paid by way of offset against the up-front deposits.
Stornoway will continue as the appointed marketing agent for 100% of the Renard diamond production.
In terms of the private placement, Stornoway carried out a treasury offering of 57 142 858 units with la Caisse at a price of C$0.35 an unit, comprising a common share and one-half of a common share purchase warrant. This will raise C$20-million.
In addition, Stornoway’s largest shareholder, Ressources Québec (RQ), has expressed the intent to subscribe for up to about C$10-million in aggregate amount of uUnits on the same terms as the private placement with la Caisse, subject to RQ obtaining all necessary consent and approvals, including formal Ministerial approval, which is expected no earlier than mid-November.
As a result of la Caisse’s subscription, la Caisse became an insider of the corporation and now holds 11.4% of Stornoway’s issued and outstanding common shares. Assuming completion of RQ’s subscription on the above terms, IQ and la Caisse would hold about 25.8% and 11.0%, respectively, of Stornoway’s issued and outstanding common shares.
Pursuant to the financing package, Stornoway has granted the right to nominate one member of the Stornoway board of directors to la Caisse.
The Renard mine is Quebec’s first producing diamond mine and Canada’s sixth. It is located in the James Bay region.