Stornoway Diamond Corporation (TSX:SWY) released the Optimization Study for its 100% owned Renard Diamond Project in Québec. The Optimization Study includes certain design refinements (such as the deferral of shaft access for the underground mine and a modified underground mining sequence and draw point design), as well as an updated project development schedule and financial model. The Optimization Study restates the project’s Probable Mineral Reserves at 17.9 million carats (23.8 Mtonnes at 75 carats per hundred tonnes, or “cpht”).
As quoted in the press release:
Highlights of the Optimization Study are as follows:
- A revised initial capital cost of C$752 million, including contingencies, in October 2012 terms, a reduction of C$50 million from the previous estimate which was expressed in June 2011 terms.
- A revised operating cost averaging C$57.63/tonne (C$76.63/carat) life of mine in October 2012 terms, an increase of C$2.92/tonne from the previous estimate.
- Base case estimates of Net Present Value (“NPV”) of C$683 million at a 7% discount rate and Internal Rate of Return (“IRR”) of 20.3% before taxes and mining duties, and C$391 million and 16.3% after taxes and mining duties, all improvements from the previous estimates.
- 11 years reserve-based mine life with diamond production averaging 1.6 million carats/annum life of mine, real terms net revenue of C$4,046 million, and a cash operating margin of C$2,693 million (67% compared to 68% in the previous estimate).
Stornoway Diamond Corporation President and CEO, Matt Manson said:
The Optimization Study reported today confirms a robust project with strong cash flows. Since the release of the project’s Feasibility Study, we have been able to bring down our initial capital cost estimate with only a modest impact on the project’s operating costs. We are particularly pleased that the project has so successfully absorbed the kind of post-feasibility design adjustments and operating agreements that can negatively impact a project’s value. The deferral of the shaft has been achieved without compromising the future development of the project’s substantial resource upside, and the refinements made to the underground mining sequence provide greater confidence in the operating parameters for this critical part of the overall mine plan. With our Mining Lease and Québec Certificate of Authorization in hand, and the Renard Mine Road under development, we can now move towards finalizing our project financing arrangements, and initiating project construction in the third quarter of this year.