Stornoway Diamond Corporation is looking for investors to help salvage its Renard mine as the company continues to incur high financial losses.
The miner called for offers to purchase its Canada operations after receiving $11.7 million in bridge financing – a short-term loan to maintain Renard until it can secure permanent financing or pay off existing debt, Stornoway explained Tuesday.
If the company fails to find a buyer or pay its debt by September 16, when the bridge financing is due, it will be considered to have defaulted on the loan.
“[We] have formally launched the…process with the objective of seeking out proposals for a restructuring transaction that would involve an investment in, or the acquisition of, all or substantially all, of the property, assets and undertakings of Stornoway and its direct and indirect subsidiaries,” the miner noted.
Stornoway began commercial production at Renard in January 2017, but has struggled with losses stemming from delays in transitioning Renard from open-pit to underground mining, and a prolonged weakness in the small-stone market.
“The global diamond market is going through a difficult time and Stornoway’s mine sells its product at a lower price than in previous years, and much lower than initially anticipated during the construction of the mine,” the miner explained. The continued weakness in demand has inhibited the company’s ability to generate profit, casting significant doubt about its ability to continue as a going concern, the company added.
In January, the miner appointed Patrick Godin as CEO following three successive quarterly losses. Stornoway’s loss deepened to $36 million in the first quarter, which ended March 31, compared with a loss of $8.2 million during the same period last year. The company will suspend open-pit operations at Renard during the course of the year, which it estimates will save between $13.4 million and $14.9 million.
Image: The Renard mine. (Stornoway Diamond Corporation)