Stornoway Diamond Corporation went into the red in the second quarter as delays at its Renard mine resulted in lower-quality production than it had anticipated.
The miner recorded a net loss of $27.4 million (CAD 35.9 million) for the three months ending June 30 as Renard’s shift to underground mining has taken longer than the company expected, Stornoway said Tuesday.
“Our second-quarter results reflect the continuing transition to underground mining at Renard, and the accompanying lower-carat recoveries and sales during the first half of the year,” Stornoway CEO Matt Manson said. “Ramp-up of the underground mine has been slower than expected.”
The miner originally stated that the transition to underground mining would be complete by the end of the second quarter. However, issues with equipment availability and management problems have impeded the process.
While revenue increased 34% to $43.5 million (CAD 56.9 million) for the quarter, it was lower than the company had forecast, resulting in weaker-than-expected liquidity.
The revenue figure is higher than the gross sales the company reported in a trading update a month ago, as the full amount includes proceeds from a first-quarter sale that it received in the second quarter. It also includes revenue from an agreement under which Stornoway sells future production to clients at a pre-set price.
During the second quarter, the miner sold 328,899 carats for an average of $115 per carat, and a further 41,979 carats for an average price of $19 per carat. Although the overall average price has increased from the same time last year, Stornoway has not yet reached its target of $125 to $165 per carat for 2018.
This year was Stornoway’s first year of full operation. The company reached commercial production at its Renard asset in December 2016.
Stornoway expects higher-quality carat recoveries in the second half of the year, Manson said, as the company moves into the central mining areas, which contain higher-grade ore.
In May, the miner reduced its production-and-sales expectations for the year from its original estimate of 1.6 million carats to between 1.35 million and 1.4 million carats. The company’s ability to meet that revised expectation will depend on its maintaining current production levels and budgeted grade for the rest of the year, Manson added.
Stornoway’s stock price fell 7% Tuesday after the company announced its earnings.