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| April 03, 2014 --- Vol. 08, No. 14 | April 2014
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Northwest Territories
EARNINGS/DIAMONDS – Dominion Diamond Corp. April 2 reported financial results of its fiscal year ended Jan. 31, 2014. Robert Gannicott, chairman and CEO of Dominion, said, “Our early experience at Ekati continues to exceed our expectations while Diavik also outperforms its planned targets. The diamond market has improved, both in pricing and volume of demand, as the important diamond consuming economies, led by the U.S., maintain momentum.” Fiscal 2014 was a year during which the company transitioned into one of the world’s largest pure play diamond mining companies. During this period, Dominion completed the sale of the Harry Winston luxury brand segment at an enterprise value of US$1 billion (including the assumption of US$250 million of pro forma net debt) and the acquisition of the Ekati Diamond Mine from a global mining company for whom diamonds were no longer a core asset. Dominion Diamond paid US$553 million for its interest in the Ekati Diamond Mine, which included US$62 million of cash, US$154 million of rough diamond inventory and US$165 million of supplies (fuel, cement and other mining supplies). The Diavik Diamond Mine, one of the highest grade diamond mines in the world, continues to deliver excellent results, according to the company. Dominion’s senior management is focused on delivering value from the Ekati Diamond Mine, and the benefits of having the senior management team on hand in Yellowknife are already being demonstrated, Gannicott said. Grade recovered is ahead of plan, and cash cost of production for the period from April 10, 2013, to Jan. 31, 2014, which were originally forecast at US$320 million, came in at US$303 million. At the beginning of calendar year 2016, the capital spending on the pushback at the Misery Main Pipe will be completed and this pipe will come into production; at more than 4 carats per metric ton at an average price of about US$105 per carat, Misery Main is one of the richest kimberlite ore bodies in the world. During this fiscal year the company has expensed US$10.1 million on the Jay project which involves the development of the largest diamondiferous resource in North America. It has the potential to extend the operating life of the Ekati Diamond Mine in the order of 10 to 20 years beyond the currently scheduled closure in 2019. The development and mining of this kimberlite is the cornerstone of the company’s strategy for building a long-term, sustainable Canadian diamond business. The company recorded a consolidated net profit attributable to shareholders of US$479.7 million, or US$5.64 per share for the year, compared to a consolidated net income attributable to shareholders of US$34.7 million or US41 cents per share in the prior year. Net loss from continuing operations attributable to shareholders was US$23.0 million compared with net profit from continuing operations attributable to shareholders of US$22.3 million, or US26 cents per share in the prior year. During the year, Dominion recorded sales from the Diavik Diamond Mine of US$352.3 million compared with US$345.4 million in the prior year. The company sold roughly 3.0 million carats from the Diavik Diamond Mine for an average price per carat of US$118, compared with 3.2 million carats for an average price per carat of US$109 in the prior year. The Diavik segment generated gross margins and EBITDA margins as a percentage of sales of 26.8 percent and 49 percent, respectively, compared to 22.5 percent and 44 per cent a year earlier. During FY‘14, the company recorded sales from the Ekati Diamond Mine of US$399.6 million and sold approximately 1.3 million carats for an average price per carat of US$301. Excluded from sales recorded in the fourth quarter were carats produced and sold from the processing of satellite material from the Misery South and Southwest kimberlite pipes, this material was excavated during the pre-stripping operations of the Misery South and Southwest kimberlite pipes. The Ekati segment generated gross margins and EBITDA margins as a percentage of sales of 1.7 percent and 15 percent, respectively. The company estimates that gross margins and EBITDA margins would have been approximately 8.2 percent and 27 percent, respectively if the effect of the market value adjustment to inventory made as part of the Ekati Diamond Mine Acquisition was excluded and the carats sold from material excavated from the Misery South & Southwest kimberlite pipes were recognized as revenue.
COBALT/GOLD/BISMUTH – Fortune Minerals Ltd. April 2 reported the results of an updated feasibility study report for its Nico gold-cobalt-bismuth-copper project. Nico is a planned vertically integrated project consisting of an open pit and underground mine and mill near Yellowknife, Northwest Territories, and a hydrometallurgical refinery near Saskatoon, Saskatchewan, where Fortune plans to process concentrates from the mine to high value metal products. Both sites have already received the environmental assessment approvals in their respective jurisdictions and are now in the final permitting phase. This new feasibility study updates the economics for the project from a front-end engineering and design study completed in 2012 and includes reserves completed for that study. The open-pit portion of Nico contains 32.5 million metric tons of proven and probable reserves averaging 0.96 grams per metric ton gold, 0.11 percent cobalt, 0.14 percent bismuth and 0.04 percent copper. The underground portion contains 577,000 metric tons of proven and probable reserves grading 4.96 g/t gold, 0.1 percent cobalt, 0.17 percent bismuth and 0.02 percent copper. Combined, these reserves contain 1.1 million ounces of gold 82.3 million pounds of cobalt, 102.1 million lbs. of bismuth and 27.2 million lbs. of copper. Based on US$1,350 per ounce gold, US$16 per pound cobalt, US$10.50/lb. bismuth and US$2.38/lb. copper, the feasibility study produces an after-tax internal rate of return of 15.1 percent and an after-tax net present value of (7 percent discount) C$224 million. Fortune said this updated feasibility study was prepared by Micon International Ltd. to document a number of improvements that have been made to the Nico project over the past year and to provide a comprehensive document to support negotiations currently underway for project financing with potential strategic partners and their banks. “This update has produced a document with a project execution that we believe is achievable and with a schedule and costs that reflect the current market. The increased capital cost better reflects the labor and indirect costs expected in the locations for the mine and processing facilities. The additional efforts to realize opportunities in mining outside of the pit shell, grid power for the mine, and greater clarity on final product mix and markets has justified an update to the previously released information,” explained Mike Romaniuk, Fortune’s chief operating officer. During a 20-year mine-life, Nico is anticipated to produce 814,000 ozs of gold doré; 70 million lbs. cobalt; 74 million lbs. bismuth; and 11.2 million lbs. copper. Cobalt accounts for 39 percent of the projected revenue, followed by gold (33 percent), bismuth (27 percent) and copper (1 percent). Fortune President and CEO Robin Goad said, “As we complete the final stages of permitting and project financing for Nico, Fortune is well-positioned to be a reliable North American source of supply of cobalt and bismuth and a highly liquid gold co-product. Our proposed Saskatchewan refinery will stand out as a North American facility dedicated to the production of cobalt chemicals needed to manufacture rechargeable batteries used in portable electronic devices and electric vehicles, the latter currently driving transformational growth in the market for cobalt. Nico is also the world’s largest single known deposit of bismuth, which is also experiencing increasing demand as a non-toxic, environmentally safe replacement for lead due to bans and restricted use of lead as a result of legislation and growing environmental awareness by manufacturers.”
DIAMONDS – Mountain Province Diamonds Inc. Apr.2 reported the results of an updated and revised feasibility study on the Gahcho Kué diamond project in Northwest Territories. According to the updated study, mining Gahcho Kué will produce an after-tax internal rate of return of 32.6 percent (excluding sunk costs) and a net present value (10 percent discount) of C$1 billion. The mine is anticipated to produce 53.4 million carats of diamonds over a 12-year mine-life. Diamonds from Gahcho Kué are valued at US$149.66 per carat, according to a modeled diamond price estimate provided by WWW International Diamond Consultants. Capital needed to complete construction of the mine is estimated at C$858.5 million (including a contingency of C$75.6 million). “The feasibility study revision and update re-confirms an economically robust, technically credible and environmentally sound development plan for the Gahcho Kué mine,” said Mountain Province CEO Patrick Evans. The Canadian federal government approved the development of the Gahcho Kué mine in October 2013 and mine site development began in December. The overall project development was roughly 17 percent complete at the end of February. Major construction is expected to be complete by 2016, to be followed by plant commissioning in mid-2016 and first production in the third quarter of that year, with commercial production targeted for the end of January 2017. JDS Energy and Mining Inc. and Hatch Ltd. compiled and prepared the updated feasibility study report for the Gahcho Kué Joint Venture between Mountain Province (49 percent) and DeBeers Canada (51 percent). Mountain Province also reported an updated mineral reserve estimate of 35.4 million metric tons averaging 1.57 carats per metric ton (55.5 million carats) of diamonds for Gahcho Kué.
FINANCIAL UPDATE – Canadian Zinc Corp. March 21 reported its financial results for the year ended Dec. 31, 2013 and provided an outlook on its 2014 activities. The company reported a net loss and comprehensive loss of C$6.91 million, compared with a net loss and comprehensive loss of $19.87 million a year earlier. During 2013, Canadian Zinc expensed C$4.928 million on exploration and evaluation cost at the Prairie Creek Property in southwestern Northwest Territories, compared with C$9.037 in 2012. The 2013 net loss also included a loss of C$3.63 million on the company’s marketable securities and C$1.16 million on exploration and evaluation costs at South Tally Pond. The loss was reduced as the company recorded a gain on the sale of a net smelter royalty in the amount of C$5.44 million with no comparable in the previous year. Excluding the loss on the marketable securities and the gain on the sale of a net smelter royalty, Canadian Zinc recorded a loss of C$8.724 million for 2013 compared with a similar loss of C$11.07 million the previous year. At Dec. 31, the company had a positive working capital balance of C$10.617 million, including cash and cash equivalents of C$8.376 million, short term investments of C$2 million and marketable securities of C$1.33 million (for a total of C$11.71 million), enough to finance its planned programs in 2014. The primary objective of the company is to bring the Prairie Creek zinc-lead-silver mine into production at the earliest opportunity and in pursuit of that objective secure the necessary capital funding to rehabilitate, upgrade and modernize the mine, inclusive of the processing plant and related site infrastructure. During 2013, the company completed the final stages of the regulatory process for obtaining operating permits with the Mackenzie Valley Land and Water Board and Parks Canada. Canadian Zinc has now obtained all the necessary and significant regulatory permits and licenses to complete construction and development at the mine site and the access road and to commence mining and milling of the Prairie Creek deposit. The company is currently undertaking an optimization study as part of which Tetra Tech has been engaged to provide technical services for basic engineering and procurement services for the development of major equipment packages, facility rehabilitation and repair work and capital items for the Prairie Creek Mine. AMC Consultants has been engaged to undertake a geotechnical study of the underground mine plan with a view to reducing the initial development, shorten the development schedule and optimize mine operating costs. Geotechnical investigations to determine optimal mining methods will be completed in the first half of 2014. Metallurgical studies, designed to enhance concentrate production and quality are being carried out in 2014 as part of Canadian Zinc’s concentrate marketing plan. The current study is scheduled to be completed by mid-2014 and, dependent on the progress of financing strategies concurrently being executed, the Company will begin procurement of long lead time items; construction of the access road; site preparation and other startup activities on site. The company is also evaluating strategies for raising the financing necessary to complete the development and construction of the Prairie Creek Mine. In May 2013, the Canadian Zinc raised US$10 million through the sale of a royalty to Sandstorm and granted Sandstorm a right of first refusal on any future royalty or stream financing for the Prairie Creek project. Under the agreement with Sandstorm, the company may repurchase the royalty if it enters into a metal stream financing under which Sandstorm will provide an upfront deposit of not less than US$90 million to be used to finance part of the capital cost to develop the Prairie Creek Mine. The company is also undertaking an ongoing exploration drill program at the South Tally Pond property in Newfoundland targeting the expansion of the Lemarchant deposit and further exploring the new zone of mineralization discovered northwest of Lemarchant. Another drill program to be completed later in 2014 will target the Tulks South property situated near the South Tally Pond property.
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