Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the
“Company” or “Dominion”) reports Ekati Diamond Mine and Diavik
Diamond Mine second fiscal quarter 2017 (May through July) sales,
Ekati Diamond Mine production results, and an update on the sale of
the Company’s Toronto office building. Unless otherwise specified,
all financial information is presented in U.S. dollars.
Highlights
- Sales:
- Second quarter diamond sales were
$160.0 million ($209.7 million in Q2 fiscal 2016).
- Ekati Production:
- During Q2 fiscal 2017, the Ekati
Diamond Mine recovered 0.9 million carats from 0.6 million tonnes
of ore processed (Q2 fiscal 2016 – 0.9 million carats recovered
from 1.0 million tonnes processed).
- During the quarter, tonnage processed
was significantly reduced as a result of the fire at the Ekati
process plant that occurred on June 23, 2016 and the subsequent
processing shutdown.
- Mining operations continued at the
higher value Koala underground and Misery Main open pit and have
been paused at the lower value Pigeon and Lynx open pits as a cost
reduction measure.
- Building Sale:
- The Company has entered into a binding
agreement to sell its downtown Toronto office building for
approximately $84.8 million Canadian dollars.
- The transaction is expected to close
during the third fiscal quarter and is subject to customary closing
conditions.
SalesEkati and Diavik
Rough Diamond SalesThe Company recorded total second quarter
sales of $160.0 million ($209.7 million in Q2 fiscal 2016). Sales
in the second quarter were lower than the prior year primarily due
to a high proportion of lower value goods from the Misery
Satellites available for sale in the quarter. Three rough diamond
sales were held during the quarter. The Company plans to hold two
rough diamond sales in the third fiscal quarter of 2017.
Q2 FY 2017 Summary
Sales in millions of US dollars
Three months ended
Jul 31, 2016
Six months ended
Jul 31, 2016
Ekati Rough (100% basis) $ 83.3 $ 188.4 Diavik Rough (40% basis) $
76.7 $ 149.8
Total Sales(1) $ 160.0 $ 338.2
Carats Sold (000s)
Ekati Rough (100% basis) 668 2,213 Diavik Rough (40% basis)
673 1,727
Total Carats Sold(1) 1,341
3,940
(1) Excluded from the Ekati sales recorded are carats produced
and sold from the processing of material during a pre-commercial
production period. During the second quarter for fiscal 2017, the
Company sold an estimated 116,000 carats of such production for
estimated proceeds of $8.3 million. For the six months ended
July 31, 2016, the Company sold an estimated 149,000 carats of such
production for estimated proceeds of $12.8 million.
The Diamond MarketAfter
buoyant market conditions in the first quarter, rough prices
stabilized in the second quarter supported by confident U.S. retail
demand. The positive conditions in the first half of the year
reduced inventories throughout the pipeline and improved liquidity
in the industry. However despite the improvements in sentiment, the
banks that finance the industry remain cautious. The retail markets
outside the U.S. remain impacted by the strong U.S. dollar, making
jewelry comparatively expensive in domestic currency
terms. Despite declines in the top end luxury sector, retail
demand growth in China is focused on the broader commercial sector
of the market supported by a growing middle class. Also in the Far
East, Japanese demand remains robust supported by luxury tourism
from China. Conversely, the retail markets in Europe, Hong Kong and
the Middle East remain somewhat subdued.
Ekati Production
- Throughput was significantly reduced in
the second quarter as a result of the fire at the Ekati process
plant that occurred on June 23, 2016 and the subsequent processing
shutdown, which is expected to last approximately three months in
total.
- Mining operations continued during the
second quarter with strong performance from both the Koala
underground and Misery Main open pit operations. Mining has been
paused at the lower value Pigeon and Lynx open pits as a cost
reduction measure.
- During the period, the Ekati Diamond
Mine recovered 0.9 million carats from 0.6 million tonnes of ore
processed (0.9 million carats from 1.0 million tonnes in Q2 fiscal
2016).
- Carat production was negatively
impacted by the process plant shutdown, but benefited from the
processing of higher grade Misery Main ore, despite some continued
dilution of initial ore as a result of sloughing during the mining
of preceding benches.
- During the quarter the Company
continued to process significant amounts of low value Misery
Satellites material.
- Approximately 1.4 million tonnes of
material remained in stockpiles at the end of the second quarter.
Higher value Misery Main and Koala ore is planned to be prioritized
throughout the remainder of fiscal 2017 when processing
recommences.
Ekati Diamond Mine Production (100% basis)
For the three months ended Jul 31, 2016 For the three
months ended Jul 31, 2015 Pipe Ore Processed(000s tonnes)
Carats(1)(000s)
Grade(1)(carats/tonne) Ore Processed(000s tonnes)
Carats(1)(000s) Grade(1)(carats/tonne) Misery Main 135 459
3.41 - - - Pigeon 157 64 0.41 - - - Fox - - - 17 5 0.31 Koala 204
116 0.57 225 179 0.80 Koala North - - - 43 23 0.53 Misery
Satellites(2) 104 217 2.08 309 490 1.59 Coarse Ore Rejects(“COR”)
(3) - - - 368 227 0.62 Total(4) 600 856 1.43 962 924 0.96
For
the six months ended Jul 31, 2016 For the six months
ended Jul 31, 2015 Pipe Ore Processed(000s tonnes)
Carats(1)(000s) Grade(1)(carats/tonne) Ore Processed(000s
tonnes) Carats(1)(000s) Grade(1)(carats/tonne) Misery
Main 209 663 3.17 - - - Pigeon 406 173 0.43 - - - Fox - - - 18 5
0.29 Koala 518 313 0.60 453 401 0.89 Koala North - - - 96 53 0.55
Misery Satellite(2) 440 783 1.78 552 830 1.50 COR(3) - - - 695 439
0.63 Total(4) 1,573 1,932 1.23 1,814 1,728 0.95
(1) As different ore sources are blended during processing,
carats and grade per pipe are estimated using the block models for
the ore processed from each pipe, adjusted for the overall
reconciliation of total carats recovered against the model. The
total carats produced include all incremental production arising as
a result of the changes made to the Ekati process plant to improve
diamond liberation.
(2) The Misery Satellites include the Misery South and Southwest
satellite pipes, which are inferred resources, and Misery Northeast
material. Approximately 2,500 tonnes of Northeast material was
processed during the six months ended July 31, 2016, at an average
grade of 0.98 carats per tonne. The Northeast material is not
included in the reserves or resources and is therefore incremental
production.
(3) This material is not included in the reserves or resources
and is therefore incremental production.
(4) Figures may not add up due to rounding.
Diavik ProductionThe Diavik
Diamond Mine production results for the second calendar quarter of
2016 were released on July 18, 2016. Diavik reports to the calendar
year ending December 31, and Ekati reports to the fiscal year
ending January 31. The Company does not report Diavik fiscal
production results.
Cautionary Statement Regarding Preliminary ResultsThe
Company cautions that the Company’s second quarter sales results
disclosed in this news release are preliminary and reflect
expectations as of the date of this news release. Actual reported
results are subject to final review and may vary from what is
currently expected because of a number of factors, including,
without limitation, additional or revised information and changes
in accounting standards or policies or in how those standards are
applied. In addition, the preliminary results contained in this
news release do not include all of the measures of financial
performance that would be disclosed in the Company’s interim
financial statements. The Company will provide additional financial
information and related discussion and analysis about its second
quarter financial results when it reports those actual results.
Forward-Looking InformationCertain information included
herein, including information about mining activities and estimated
production from the Ekati Diamond Mine, the estimated timeline for
production to recommence at the Ekati processing plant and
expectations regarding the sale of the Company’s office building,
constitutes forward-looking information or statements within the
meaning of applicable securities laws. Forward-looking information
is based on certain factors and assumptions including, among other
things, the current mine plan for the Ekati Diamond Mine; mining,
production, construction and exploration activities at the
Company’s mining properties; the estimated timeframe to complete
the necessary repairs at the Ekati processing plant; currency
exchange rates; world and US economic conditions; future diamond
prices; and the level of worldwide diamond production.
Forward-looking information is subject to certain factors,
including risks and uncertainties, which could cause actual results
to differ materially from what the Company currently expects. These
factors include, among other things, the uncertain nature of mining
activities, including risks associated with underground
construction and mining operations, risks associated with joint
venture operations, risks associated with the remote location of
and harsh climate at the Company’s mining properties, risk of
delays in completing the repairs to the Ekati process plant, risks
resulting from the Eurozone financial crisis, risks associated with
regulatory requirements, the risk of fluctuations in diamond prices
and changes in US and world economic conditions, the risk of
fluctuations in the Canadian/US dollar exchange rate and cash flow
and liquidity risks. Actual results may vary from the
forward-looking information. Readers are cautioned not to place
undue importance on forward-looking information, which speaks only
as of the date of this disclosure, and should not rely upon this
information as of any other date. While the Company may elect to,
it is under no obligation and does not undertake to, update or
revise any forward-looking information, whether as a result of new
information, further events or otherwise at any particular time,
except as required by law. Additional information concerning
factors that may cause actual results to materially differ from
those in such forward-looking statements is contained in the
Company's filings with Canadian and United States securities
regulatory authorities and can be found at www.sedar.com and
www.sec.gov, respectively.
About Dominion Diamond CorporationDominion Diamond
Corporation is the world’s third largest producer of rough diamonds
by value. Both of its production assets are located in the low
political risk environment of the Northwest Territories in Canada
where the Company also has its head office. The Company is well
capitalized and has a strong balance sheet.
The Company operates the Ekati Diamond Mine and also owns 40% of
the Diavik Diamond Mine. Between the two mining operations,
diamonds are currently produced from a number of separate
kimberlite pipes providing a diversity of diamond supply as well as
reduced operational risk. It supplies premium rough diamond
assortments to the global market through its sorting and selling
operations in Canada, Belgium and India.
For more information, please visit
www.ddcorp.ca
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version on businesswire.com: http://www.businesswire.com/news/home/20160818006283/en/
Dominion Diamond CorporationMs. Kelley Stamm,
416-205-4380Manager, Investor Relationskstamm@ddcorp.ca