Stornoway Diamond Corporation (TSX:SWY) announced today its second quarter results for the three months ended October 31, 2015.
Second Quarter FY2016 Highlights
(All quoted figures in CAD$)
Matt Manson, President and CEO, commented “At the half way point in the construction of the Renard Diamond Project, we are pleased to report continued construction progress on or ahead of planned schedule and a forecast cost to complete within our fully funded C$811 million capital budget. For another quarter, a significant foreign exchange gain on our current and committed US dollar funds is serving to strengthen our cash position as we look forward to plant commissioning and project ramp up starting late next year. We end 2015 with a record of steady progress against plan, and a stronger financial position than expected.”
Change of Fiscal Year-End
To better synchronize financial, operational and regulatory reporting, Stornoway will change its fiscal year-end from April 30th to December 31st, and will next file financial results for a truncated quarter and fiscal year ending December 31, 2015. This change is being effected prior to the expected commencement of first diamond production in late 2016. The current quarterly reporting period, described herein as the second quarter of FY2016, will be re-designated as second quarter October 31, 2015, with the quarter beginning January 1st 2016 becoming the first quarter of FY2016 under the new reporting calendar.
Financial Summary
Stornoway ended the quarter with cash, cash equivalents and short-term investments of $290.3 million, compared with $270.1 million at the end of the previous quarter. On September 30 2015 the second payment deposit under the Renard stream agreement was received on schedule from Orion Mine Finance, the Caisse de dépôt et placement du Québec and Blackstone Tactical Opportunities. The US$80 million of funds received were converted to Canadian dollars upon deposit at an exchange rate of $1.336, representing a cash gain to the Corporation of C$18.9 million compared to the July 2014 funding plan, which assumed a C$:US$ exchange rate of $1.10. Stornoway’s current cash resources are sufficient to cover planned mine development expenses, financing and corporate costs during calendar 2015. The third payment deposit under the stream agreement of US$90 million is expected to be received in March 2016, following which Stornoway expects to draw on a $100 million senior secured loan in late 2016 to complete mine development.
Assuming the full utilization of the senior secured loan, the Corporation currently forecasts excess funding capacity of $100 million comprised of $52 million of cash, receivables and expected mine tax credits and $48 million of undrawn cost overrun facilities. This forecast assumes a project cost of $811 million (which includes assumed levels of escalation and contingencies), the satisfaction of all covenants and conditions precedent for future funding, and a CAD$:US$ exchange rate of $1.25 for unfunded US dollar denominated financing commitments. As construction of the Renard Diamond Project progresses, this forecast is expected to change quarter to quarter based on the timing of expenditures and receipts, volatility in the CAD$:US$ exchange rate, and any change to the forecast cost of the project. Capital expenditures incurred during the quarter were $90.5 million, with capital expenditures to date of $472.0 million having been committed against the total project cost.
Net earnings for the three months ended October 31, 2015 decreased by $1.4 million to $10.3 million compared to earnings of $11.7 million in the previous year, and includes other income (expenses) of $12.6 million. Net earnings were impacted by several items not reflective of Stornoway’s underlying operating performance, including changes in the fair value of a derivative and unrealized gains and losses from foreign exchange. Operating expenses for the three months ended October, 2015 totaled $2.2 million
