VANCOUVER (miningweekly.com) – Ongoing diamond breakage in the Renard process plant is reducing the proportion of larger diamonds available for sale and dimming revenue prospects for Quebec-focused miner Stornoway Diamond Corp, at a time when market sentiment for Renard’s precious gems is on the rise.
However, president, CEO and director Matt Manson tells Mining Weekly Online that the company is confident it has now isolated the issue and that a fix is in the works, which could see the operation rake in more cash from early next year for its larger, more valuable products.
“Renard’s diamonds have been very well received by the market so far. Normalised for variability, size, grade and breakage, when one measures how much people are willing to pay for Renard diamonds, the figure has risen 19% since the first sale took place in November 2016,” he said in an interview Monday.
He explained that, despite the ‘new producer discount’ that comes into play, as the market first wants to test product and account for things such as breakages during cutting and polishing, prices are now ticking up. “The results tell us that the goods are being well received. It is a big weight off our shoulders,” he commented.
But breakage – a classic diamond mine start-up issue – has been preventing Stornoway from accessing premium pricing for its larger stones ever since production started last year.
Manson explained that the bulk of the breakage appears to be happening at the front-end of the plant, mainly owing to the expected higher-than-average internal dilution of Renard ore, between 30% and 65%. The ore typically contains more than 50% waste, which is preventing the correct conditions of diamond liberation being achieved in the plant’s secondary and tertiary crushers, and the concentration of the hard waste alongside free diamonds in the crushers and recovery circuits is the principal cause of the breakage.
During the first half of 2017, Stornoway has conducted trials on a spectral waste-sorting technology and achieved promising results in the segregation of the white and pink-, quartz- and feldspar-dominated gneissic and granitoid waste from the darker coloured, olivine-rich kimberlite.
Stornoway’s board has approved a C$22-million programme of plant modifications and operational refinements designed to reduce the breakage to a more acceptable level and produce a higher-quality diamond product. The gneissic country waste rock is harder than the diamonds and the kimberlite, and breaks the diamonds in the crushing circuits.
A waste-sorting circuit rated at 7 000 t/d of ore, and expandable, will be added to the Renard process plant immediately after the primary jaw crusher and before the secondary cone crusher to extract waste in the +30 mm to 200 mm size range. Extracted waste will be trucked for disposal, and the concentrated, less-dilute kimberlite will be reintroduced to the plant for crushing.
The circuit is expected to add $1/t to operating costs and will have the ancillary benefit of reducing load on the rest of the Renard process plant, allowing future potential expansion. Commissioning of the new circuit is scheduled to occur in the first quarter of 2018.
“We are fortunate that the internal gneiss has high spectral discrimination, with bench-scale tests, conducted in Germany, showing very good results to remove the waste before entering the plant.
“It is not generally understood that all diamond plants have some degree of breakage. It is monitored but rarely reported to the market. We’ve been honest and open about it and [we are] now in the continuous improvement phase, to manage the breakage lower to an acceptable level,” Manson stated.
The breakage has not materially impacted on the company’s current focus to grow output, and the operation is hitting the marks on productivity and costs, among other targets, Manson advised. “Even with the breakage, we are still achieving a 50% cash margin, meaning the underlying business is good. Also bear in mind that we are still building the underground phase of the mine this year, funded by our strong balance sheet,” he said.
He noted that Stornoway would not use its current strong balance sheet for mergers and acquisition activity, since opportunities in North America are very rare. However, the company is focused on growth at the drill bit, and the team has developed a knack for finding kimberlites in Quebec.
Exploration activities are ongoing, including the acquisition, by staking, of three new 100%-owned diamond properties targeting specific features of interest identified from a review of proprietary databases. Collectively, the select properties total about 4 538 ha, and other landholdings may be added. Applications for access permits are in preparation, and Stornoway anticipates conducting work programmes later this season.
Drilling activities completed in April on the 28 171 ha Adamantin property (located about 100 km south of Renard and 25 km west of the Route 167 extension road) resulted in the discovery of two new kimberlite occurrences. Diamond results are still pending for these discoveries.
Till sampling at Adamantin during 2015 confirmed the presence of indicator mineral anomalies interpreted to be sourced from undiscovered kimberlites with diamond potential, with one till sample having a diamond in the +0.25 mm to 0.50 mm size fraction. Drilling during March and April of 2016 resulted in the discovery of 11 distinct kimberlite bodies, but no diamonds were recovered from these samples, leaving the source of the diamond in till currently unexplained.
Manson mentioned that Quebec has very good real estate for diamond exploration. Only about three companies undertook prospecting in Northern Quebec in the past, which eventually resulted in the Renard discovery. However, he believes that ‘many fish could have swam through the net”.
Renard was only discovered after five years of continuous drilling, something the market would not afford a junior explorer in the current environment. There is significant potential in Quebec still, with prospective lands covering an area the size of France, according to Manson.
“While we do not know where additional kimberlites are located, we do have a good idea of where some things might have been missed, and we are continuing to work towards understanding prospective targets. Of the 35 targets we have previously explored, we’ve discovered nine kimberlite pipes at Renard.”
He noted that as a price taker, it is necessary for Stornoway to have a positive long-term price outlook.
Stornoway was one of three new diamond producers to enter the market in the last 12 months – the others being Firestone Diamonds starting the Liqhobong mine, in Lesotho in 2016, and De Beers Canada and Mountain Province Diamonds opening the Gahcho Kué mine, in the Northwest Territories – with all three missing the mark on expected prices during initial sales.
Stornoway stunned the market in April 2014 when it revealed that it had wrapped up negotiations on a series of financing transactions comprising debt, equity and a unique diamond stream financing totalling C$944-million to fund construction of the Renard mine.
The company had entered into a binding financing commitment agreement with Orion Co-Investments I Limited, Investissement Quebec subsidiary Ressources Quebec, and the Caisse de depot et placement du Quebec for the construction of the Renard project.
The transactions were designed to provide full funding until commercial production, representing the largest-ever project-financing package for a publicly listed diamond company.
“We self-financed and constructed Renard and we were able to do this because of the strong asset, the strong support from our shareholder base, a good jurisdiction and despite the small size of the diamond market relative to something like the gold sector.
“We were the pioneers in Quebec and our efforts to build a good team from early on were critical to our success. We approach Renard development with the central philosophy of setting up Stornoway much like a big marques tent, and gradually bringing in key role-players under our tent as things progressed. For instance, the project started being a 50/50 joint venture with the Quebec government, until we managed to draw them into our ‘tent’; and then did the same with our First Nation partners, shareholders and financiers. We got a lot of kudos for that,” he said.
However, Manson noted that Stornoway has a much different shareholder base than its rivals, being mostly North America-based. “While we have much in common with Firestone and Gahcho Kué, we are worlds apart when it comes to the shareholder base.
“We also were first to finance a mine using a diamond streaming agreement. While some people have thought of it as a negative to diamond upside, the streaming deal has worked out very well for us, providing downside protection during critical phases. Our capital structure has served us well – we are not over-levered, and we are very happy about it,” Manson advised.
Stornoway expects the Renard mine to produce about 1.6-million carats a year over an initial 14-year mine life, representing some 2% of global supply. In 2017, Stornoway plans to mine 4.4-million tonnes of ore and waste from the openpits and 500 000 t from the underground mine. Two-million tonnes of ore will be processed for a planned recovery of 1.7-million carats at a grade of 86 carats per hundred tons.