Diamond Investing News speaks with Éric Lemieux, metals and mining analyst with Laurentian Bank Securities, about the positive outlook for diamond producers and the future of Stornoway Diamond Corp.’s (TSX:SWY) project in Northern Quebec.
As quoted in the press release:
DIN: Other than decreasing risk, the company also seems intent on increasing the resource or decreasing costs — things that would positively impact the net present value. What are some of the potential upcoming milestones that could increase the NPV?
ÉL: Results of the valuation of the Renard 65 (“R65”) summer/fall 2012 bulk sample could provide new mineral reserves and hence positive impact on project NPV. Review of mine planning scenarios could also lead to improved project NPV (e.g.: deferred capital costs). Key point is that the project will be road accessible and perhaps Hydro-Quebec will review its hydro-electrical supply cost service offer. We highlight that the Otish Mountains could be prime sector for wind farms owing to sustained winds.
I would also expect a re-rating of the project’s value, as it has been significantly de-risked, this based on the application of a lower discount rate. Probably has not been done in light of general market conditions and the project financing uncertainties. We would expect once project financing has been established, that the projects risk profile be substantially decreased improving project NPV considerably. We highlight that LBS uses an 8 percent discount rate.