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Stornoway Diamond's 2016 Financial Report Reaffirms Its Position in the Industry

- By Lovisa Alvin

Stornoway Diamond Corp. (SWY.TO) released its 2016 financial and operating results on Feb. 23. Stornoway is one of the top diamond exploration and development companies in Canada. It is headquartered in Montreal and is listed on the Toronto Stock Exchange. The company's flagship asset is the Renard Diamond Project, which is the first diamond mine in Quebec.

The major highlights in Stornoway's financial report for 2016 included the official opening of Reinard Diamond Mine on Oct. 19, 2016, in a grand ceremony that was attended by local as well as regional dignitaries, Stornoway staff, stakeholders in the project and members of the local community. The Renard Diamond Mine is the first diamond producing mine in Quebec and the sixth in Canada. The project was initiated in July 2014 and the first commercial production was announced on Jan. 1.

The total costs of the project as of Dec. 31, 2016, stood at 771.2 million Canadian dollars ($585.8 million), which was 99% of the project's budget. With CA$2.8 million set aside for 2017, the total cost of completing the project is estimated at CA$774 million, which is CA$37 million below the initial budget set for the project in 2014.

Reinard Mine was yet to sell a diamond prior to November last year. Its diamonds were first sold in a sale held in Antwerp, Belgium, in November 2016, where 38,913 karats were sold at a price of $195 (U.S.) per karat. The sale generated revenue of CA$10.2 million, which was quite impressive considering this was unbudgeted pre-production revenue.

Stornoway reported CA$52 million in net income for the three months ending on Dec. 31, 2016, which represents 60 cents earnings per basic share. The company's cash, short-term investments and cash equivalents stood at CA$86 million. After construction, the company's total financial liquidity, receivables, expected mine credits and available credit facilities was CA$165 million.

The company's CA$19.6 million net income for the current period (the year that ended on Dec. 31, 2016) increased significantly in comparison to a CA$3.7 million loss it reported at the end of December 2015 (the comparative period).

In summary, Stornoway ended 2016 with cash, short-term investments and cash equivalents totaling CA$86 million. At the end of the last quarter of 2016, the company had CA$150.6 million. According to Stornoway CEO and President Matt Manson, the company's financial results for 2016 confirmed successful completion of the Reinard Mine at a budget below the estimated costs. The mine was also completed ahead of schedule. Now that the capital period is over and production in full gear, the company is steadily increasing its volume of products offered at diamond sales. So far, it has acquired two additional tenders and, despite the impact of the Indian market on diamond pricing, the company is seeing significant improvements in the market for lower quality items and stronger premiums in high-end goods. Manson is positive about the company's position on the basis of the greatly strengthened balance sheet as it begins fiscal year 2017.

Disclosure: I do not own any shares of any stocks mentioned in this article.

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