Dominion Diamond Announces Fiscal 2018 Guidance: Strong Sales and Adjusted EBITDA Driven by High Value Ekati Production and Solid Performance at Diavik

by pmnationtalk on March 17, 201753 Views

YELLOWKNIFE, Northwest Territories–Mar. 16, 2017– Dominion Diamond Corporation (TSX:DDC, NYSE:DDC) (the “Company” or “Dominion”) today released its guidance for sales, Adjusted EBITDA(1), unit operating costs, and capital and exploration expenditures for fiscal 2018 (ending January 31, 2018). All amounts are in US dollars unless otherwise noted. An exchange rate of 1.33 CDN$/US$ was used for costs denominated in Canadian dollars.

Highlights

  • Sales are expected to be between $875 and $975 million, an increase of 62% compared to fiscal 2017 sales, assuming the mid-point of fiscal 2018 guidance is achieved.
  • Adjusted EBITDA is forecast to be between $475 and $560 million, reflecting a high margin ore mix, combined with ongoing cost containment and efficiency initiatives.
  • The cash cost of production(2) is expected to be between $70 and $80 per tonne processed and between $35 and $40 per carat produced.
  • Growth capital expenditures are expected to total between $115 and $140 million, demonstrating a commitment to investment in growth. Sustaining capital expenditures, including capitalized production stripping, are expected to total between $160 and $190 million.
  • The production guidance released earlier this year is reaffirmed for the Ekati Diamond Mine and Diavik Diamond Mine. Combined production at the Ekati mine (100% basis, fiscal 2018) and the Diavik mine (40% share, calendar 2017) is expected to be between 9.1 and 10.0 million carats.
  • Opportunities exist to enhance the medium and longer-term production profile at Ekati, including the potential development of the Misery Deep and Fox Deep projects, for which pre-feasibility studies are currently underway.

“We continue to execute on our long-term strategic plan and to deliver results. Our strong sales and Adjusted EBITDA forecasts for fiscal 2018 are driven by high value production from Koala and Misery Main, as Ekati moves to the first full year of the new phase of the mine plan,” said Jim Gowans, Chairman of the Board of Directors. “The cash flow generated by Ekati and Diavik during this period is expected to be ample to fund our pipeline of attractive growth projects and a renewed focus on exploration.”

(1)

The term EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-IFRS measure. Adjusted EBITDA removes the effects of impairment charges, foreign exchange gains (losses) and exploration costs from EBITDA.

(2)

Cash cost of production is a non-IFRS measure, and includes mine site operating costs such as mining, processing and administration, but is exclusive of amortization, capital, and exploration and development costs. Cash cost per tonne processed and cash cost per carat produced are calculated by dividing cash cost of production by total tonnes processed and total carats produced, respectively.

The Company continues to deliver on its production plan and to advance several projects at Ekati, in addition to the A-21 project at Diavik. The Jay project is in the final stage of permitting, with the water license expected this summer. In addition to the Jay project and greenfield exploration, a number of near-term and longer term development opportunities are being advanced in fiscal 2018 at the highly prospective Ekati property.

  • Lynx project: Commercial production of high value carats is expected in fiscal 2018.
  • Sable project: First production of high value carats is anticipated in fiscal 2020.
  • Misery Deep project: A pre-feasibility study is being completed on the development of an underground operation below the final profile of the planned open pit. The study is focused on the processing of additional high value ore from the Misery pipe, and a positive outcome could lead to the recovery of carats beyond fiscal 2020, enhancing the production profile at Ekati. Completion of the pre-feasibility study is expected in the second quarter of fiscal 2018.
  • Fox Deep project: As disclosed in the news release of February 22, 2017, based on encouraging bulk sample results from the previously-mined Fox open pit, a pre-feasibility study is underway to examine the economics of an underground mine below the large open pit. As of July 31, 2016, the Fox kimberlite pipe had an indicated resource of 35.2 million tonnes containing 11.6 million carats. A resource update is expected in the current fiscal quarter. The pre-feasibility study is scheduled to be completed in late fiscal 2018.

The guidance provided in this press release is qualified by the “Forward-Looking Information” section of this press release.

Fiscal 2018 Financial Guidance

Fiscal 2018 Financial Guidance Ekati (100%) Diavik (40%) Combined
Sales(1) $ millions 575 645 300 330 875 975
Adjusted EBITDA(2) $ millions 315 370 180 210 475 560
Depreciation and Amortization in Cost of Sales $ millions 225 265 85 100 310 365
Average price per carat sold $/carat 60 80 90 110 70 90
Note: Totals may not add up due to rounding

(1)

Sales guidance for fiscal 2018 includes production from the Misery Southwest pipe, which is currently an inferred resource (this is the Operating Case). The mine plan for fiscal 2018 foresees between 1.3 and 1.4 million carats recovered from Misery Southwest, with an estimated market value of between $48 and $52 million. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the Operating Case will be realized.

(2)

Combined Adjusted EBITDA includes corporate G&A. EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-IFRS measure. Adjusted EBITDA removes the effects of impairment charges, foreign exchange gains (losses) and exploration costs from EBITDA.

Sales are expected to be between $875 and $975 million, an increase of 62% compared to fiscal 2017 sales, assuming the mid-point of fiscal 2018 guidance is achieved. Sales are expected to benefit from the focus on high value ore from the Misery Main and Koala underground pipes at the Ekati mine in the latter part of fiscal 2017 and the first quarter of fiscal 2018. This, combined with the ramp up of ore from the Pigeon and Lynx pipes at Ekati during the remainder of the year and strong production from the Diavik mine, is expected to drive sales approaching $1 billion.

The diamond market continues to recover from the impact of demonetization in India. The guidance for fiscal 2018 foresees the sale of a higher volume of lower value diamonds that were previously held back from sale due to the weaker market conditions following the demonetization. This is expected to affect the average price per carat sold as well as the number of carats sold.

Adjusted EBITDA is expected to be between $475 and $560 million, reflecting a high margin ore mix, combined with ongoing cost containment and efficiency initiatives, including reduced energy consumption and continued implementation of the long haulage strategy at the Ekati mine, with the addition of two high-capacity road trains.

The average price per carat sold is expected to range from $70 to $90 per carat. The upper end of the range reflects the potential for a larger proportion of sales of higher value diamonds, while the lower end of the range reflects the potential for a higher proportion of sales of lower quality stones.

Sales, Adjusted EBITDA and the average price per carat sold in any given quarter are impacted by seasonal trends in the diamond industry, the number of sales in a quarter, ore mix, the sale of special stones via a limited number of special tenders during the year, and other factors. The Ekati mine contains a greater number of kimberlite sources, each with different average price per carat and grade profile compared to those at the Diavik mine. In the first fiscal quarter, we expect the combined average price per carat sold to be near the low end of the guidance range for the full fiscal year, partly due to a significant amount of lower value goods in inventory from recent Misery Main production, and weakness in the lower value segment of the diamond market due to demonetization in India. This is expected to reverse later in the year with the processing of ore containing diamonds with a higher average price per carat.

Read More

NT4

Send To Friend Email Print Story

Comments are closed.

NationTalk Partners & Sponsors Learn More