Home > Boards > Canadian > Mining/Resources > Stornoway Diamond Corp. (TSX:SWY)

Stornoway (SWY.TO) Reports Positive Renard 65 Diamond Valuation Result

Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
RobertJames Member Profile
 
Followed By 5
Posts 295
Boards Moderated 0
Alias Born 11/01/11
160x600 placeholder
RobertJames   Thursday, 04/11/13 10:48:00 AM
Re: None
Post # of 46 
Stornoway (SWY.TO) Reports Positive Renard 65 Diamond Valuation Result



MONTREAL, QUEBEC--(Marketwired - April 11, 2013) -Stornoway Diamond Corporation (TSX:SWY) is pleased to provide the results of an independent valuation on the Renard 65 bulk sample diamonds recently recovered at the Renard Diamond Project in north-central Quebec. The valuation was undertaken in Antwerp, Belgium by WWW International Diamond Consultants ("WWW") utilizing their March 2013 price book. Highlights are as follows:
•An average price of US$250 per carat on the total Renard 65 parcel of 997 carats.
•A diamond price model for Renard 65 of US$180 per carat, with a "High" sensitivity of US$203 per carat and a "Minimum" sensitivity of US$169 carat.
•Valuations of US$8,500 per carat and US$5,900 per carat on the two largest stones of 9.77 carats (G colour) and 6.40 carats (F colour) respectively.

Matt Manson, President and CEO commented "This new valuation work has confirmed a high quality diamond population at Renard 65 that we anticipate will now allow the addition of a substantial quantity of new, open-pit resources to the project's mine plan. Two features of this work stand out. Firstly, the two large stones in the sample, previously announced by Stornoway, have been confirmed by WWW as amongst the most valuable stones recovered at the project to date. Their large impact in the parcel valuation has been tempered, appropriately, in the recommended base case price model, but their presence confirms a key characteristic of the Renard Project: upside value potential in large gems. Secondly, the WWW work has determined that Renard 65 possesses a diamond population with a different, and generally better, assortment of qualities than is seen in the other Renard kimberlite pipes. This has prompted a re-evaluation of the valuation models used in the project generally, which have previously been based on the assumption that Renard exhibits a single diamond population sampled by multiple pipes. The consequences of these findings for the project are significant, and positive."

Renard 65 and the Renard Mine Plan

The Renard 65 bulk sample was undertaken with a view to the potential conversion of material that is currently classified as an Inferred Mineral Resource to an Indicated Mineral Resource and, if warranted, to a Mineral Reserve. Within the larger Renard Mineral Resource inventory, Renard 65 contains an Inferred Mineral Resource of 3.7 million carats (representing 12.9 million tonnes at an average grade of 29 carats per hundred tonnes) to a depth of 290m, with an exploration potential estimated at between 6.8 and 13.7 million carats (29.5 to 41.6 million tonnes at between 23 and 33 cpht) from 290m to 775m in depth. As outlined in November 2011 Feasibility Study and subsequent Optimization Study, the Renard mine plan currently contemplates the mining of a 17.9 million carat Mineral Reserve from Renard 2, 3 and 4 from a combined open pit and underground mine at a processing rate of 6000 tonnes per day. Consistent with Canadian disclosure standards, this mine plan does not include the mining and processing of any of the project's Inferred Mineral Resources. The addition of new open-pit resources at Renard 65 is expected to allow an increase in processing capacity to 7000 tonnes per day and the extension of the project's reserve life.

The reader is cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. In addition, the potential quantity and grade of any exploration target is conceptual in nature, and it is uncertain if further exploration will result in it being delineated as a mineral resource

Diamond Market Survey

The Renard 65 valuation exercise has also afforded an opportunity to calibrate the value of the Renard 2, 3 and 4 diamond parcels in the current market against the May 2011 price assumptions that were used in the November 2011 Feasibility Study and subsequent Optimization Study. Over this period the diamond market has experienced a high degree of price volatility, including a sustained period of weakness in 2012. However, the market has recovered in the first quarter of 2013 and WWW have reported that prices for Renard-specific diamond assortments are currently within 7% to 8% of May 2011 levels.



Table 1: Summary of Parcel Valuations1



Kimberlite

Sample Size (Carats)

Average of Independent Valuations (May 2011)2

WWW Valuation(May 2011)3

Average of Independent Valuations (Mar 2013)2

WWW Valuation(Mar 2013)3

Price Change Due to Market



Renard 2

1,581

$173

$195

$161

$180

-7%



Renard 3

2,752

$171

$190

$157

$173

-8%



Renard 4

2,674

$100

$107

$93

$100

-7%



Renard 65

997

n/a

n/a

n/a

$250

n/a


Notes
1.All prices in US$/carat. Samples utilizing a +1 DTC sieve size cut-off.
2.Based on the average of 5 independent diamantaire valuations, as established in the May 2011 open market valuation exercise. This average is adjusted into March 2013 terms based on the application of the relative price changes seen by WWW over this period.
3.Based on WWW alone. In each case WWW's own valuation was higher than the average of the five valuations.

Renard Diamond Price Models

The May 2011 valuation exercise utilized valuations by 5 independent valuators, including WWW, from which diamond price models were derived for mine planning purposes. At that time, the diamond samples from each kimberlite pipe were interpreted by Stornoway to have similar characteristics and represented a single diamond population. This interpretation led to the recommendation that employing a single diamond price model, derived from combining the Renard 2 and Renard 3 datasets, would be the most appropriate method for establishing diamond price estimates for the Renard project.

The determination that the Renard 65 kimberlite has a markedly different assortment of diamond qualities than the other kimberlite pipes has led WWW to recommend that individual price models for each pipe now be considered, and that the small differences in diamond quality and size distribution that can be observed in the diamond samples be treated as real. This has the effect of increasing the base case diamond price model for Renard 2 and decreasing the diamond price models for Renard 3 and Renard 4. The Renard kimberlites can now be said to exhibit similar, but different, diamond populations meriting individual consideration for pricing and valuation modeling. This is consistent with what is seen in most other diamond mines in the world that are based on a cluster of individual kimberlite pipes. Since Renard 2 contains 83% of the current Mineral Reserve at Renard, this adjustment to individual valuation models is expected to yield a net positive impact on project value.



Table 2: Diamond Price Models1




WWW Price Models (May 2011)
Utilizing Common Value and Size Distribution Models

WWW Price Models (Mar 2013)
Utilizing Independent Value and Size Distribution Models



Kimberlite

Base
Case
Model

Sensitivities

Base
Case
Model

Sensitivities



High

Minimum

High

Minimum



Renard 2

$182

$236

$163

$190

$214

$151



Renard 3

$182

$205

$153

$151

$185

$141



Renard 4

$112
($164)2

$185

$105

$104
($150)2

$168

$98



Renard 65

n/a

n/a

n/a

$180

$203

$169


Notes
1.All prices in US$/carat. Samples utilizing a +1 DTC sieve size cut-off.
2.Should the Renard 4 diamond population prove to have a diamond population with a size distribution equal to the average of Renard 2 and 3, WWW have estimated that a base case diamond price model of $164 per carat would apply based on May 2011 pricing and $150 per carat based on March 2013 pricing.

For purposes of comparison, updated diamond price models based on the same assumptions used in May 2011 have been estimated by WWW as US$166 per carat for Renard 2 and 3 (with a High sensitivity of US$183 and a Minimum sensitivity of US$155) and US$150 for Renard 4 (with a High sensitivity of US$168 and a Minimum sensitivity of US$140), consistent with recent market price movements.

In the case of Renard 4, independent studies on diamond breakage and poor plant performance during the processing of the bulk sample have previously indicated that the size distribution of the Renard 4 diamond sample has been artificially modified during recovery. Should this prove to have been the case, a higher diamond price estimate for the Renard 4 kimberlite might still be expected.

Large Diamonds in Exploration Samples at Renard

Since its discovery in 2001, a characteristic of the Renard Diamond Project has been the incidence of large, high quality diamonds that have been recovered at each stage of exploration sampling. The most celebrated of these was a Renard 65 white octahedral gem of at least 4 carats discovered embedded in drill core in 2003. To date approximately 8,000 carats have been recovered from the Renard 2, 3, 4 and 65 kimberlite pipes, including 17 stones weighing 5 carats or more with a combined weight of 123.32 carats (see picture on our websitehttp://tinyurl.com/cudp9e8). These include a 15.46 carat top light brown "makeable" gem from Renard 2, a 10.15 carat white octahedral gem from Renard 3, and the 9.77 carat white octahedral gem from Renard 65. In the latest WWW valuation the average value of these 17 stones is US$3,100 per carat. Six stones have values in excess of US$4,000 per carat. The WWW base case valuation models for the Renard project assume an average price of, variously, US$1,900 to US$2,200 per carat for stones between 5 and 10 carats in size. A substantial increase in revenue will be achieved for the Renard Project should large diamonds continue to be recovered upon commercial production on the same basis as has been achieved in the sampling performed to date.

About the Renard Diamond Project

The Renard Diamond Project is located approximately 250 km north of the Cree community of Mistissini and 350 km north of Chibougamau in the James Bay region of north-central Québec. In November 2011, Stornoway released the results of a Feasibility Study at Renard, followed by an Optimization Study in January 2013, which highlighted the potential of the project to become a significant producer of high value rough diamonds over a long mine life. Probable Mineral Reserves as defined under National Instrument ("NI") 43-101 stand at 17.9 million carats, with a further 17.5 million carats classified as Inferred Mineral Resources, and 23.5 to 48.5 million carats classified as non-resource exploration upside. All kimberlites remain open at depth. Pre-production capital cost stands at an estimated C$752 million, with a life of mine operating cost of C$57.63/tonne giving a 67% operating margin over an initial 11 year mine life. Readers are referred to the technical report dated December 29th, 2011 in respect of the November 2011 Feasibility Study for the Renard Diamond Project, and the technical report dated February 28th, 2013 in respect of the January 2013 Optimization Study, for further details and assumptions relating to the project


Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
Follow Board Follow Board Keyboard Shortcuts Report TOS Violation
X
Current Price
Change
Volume
Detailed Quote - Discussion Board
Intraday Chart
+/- to Watchlist
Consent Preferences