Blackstone Tactical Opportunities has acquired a significant equity position in Stornoway Diamond Corp, and a minority ownership interest in the Renard diamond stream through a secondary market transaction with Orion Mine Finance. Stornoway agreed to sell a 20 percent interest in diamonds produced from the Renard Diamond Project for an upfront payment of $250 million. Orion remains majority owner of the Renard stream interest and the second largest shareholder with a 20 percent stake in Stornoway’s issued and outstanding common shares.
Stornoway Diamond Corporation (TSX:SWY) (the “Corporation” or “Stornoway”) is pleased to announce that Blackstone Tactical Opportunities, an affiliate of Blackstone (NYSE:BX), has acquired a meaningful equity position in Stornoway and a minority ownership interest in the Renard diamond stream by way of a secondary market transaction with Orion Mine Finance (“Orion”).
The Renard diamond stream was concluded in July 2014 by FCDC Sales and Marketing Inc. (“FCDC”), a wholly owned subsidiary of Stornoway, by which FCDC agreed to sell a 20% undivided interest in diamonds produced from the Renard Diamond Project for an up-front payment of US$250 million. Following the Blackstone-Orion transaction, Orion remains the majority owner of the Renard stream interest and continues to be the second largest shareholder with an approximate 20% stake in Stornoway’s issued and outstanding common shares.
Matt Manson, President and CEO, commented “We are very happy to welcome Blackstone as a shareholder and streaming partner in the ongoing development of the Renard Diamond Project. Blackstone’s transaction with Orion is additional validation of the good progress being made by the Stornoway team and in the long term fundamentals of the diamond mining sector. Blackstone’s global presence and their long-established status as one of the world’s leading investment firms make them ideally suited to Stornoway as we work to build a world class diamond mining company.”
“Blackstone is excited to partner with Stornoway and Orion in the development of this high-quality diamond asset with significant resource potential,” said Jasvinder Khaira, Managing Director of Blackstone Tactical Opportunities. “The Stornoway team are talented operators, uniquely situated to bring the Renard mine to production on time and on budget. Our partnership with Stornoway is consistent with our strategy of backing best-in-class managers and exceptional assets in the mining industry.”
Oskar Lewnowski, Chief Investment Officer of the Orion Mine Finance Group, commented “As one of the largest investors dedicated to the mining industry since 2004, we are delighted to introduce Blackstone to the Renard project. We continue to have a great amount of confidence in Stornoway’s management team and maintain our support for the Renard Project as a leading shareholder and the majority stream buyer.”
The Renard Diamond Project is fully financed and permitted for development of an open pit and underground diamond mine that is expected to produce an average of 1.6 million carats per year over an initial 11-year mine life, representing approximately 2% of global diamond supply by value. The project remains on schedule for plant commissioning beginning in late 2016 and commercial production in the second quarter of 2017.
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. On July 8th 2014 Stornoway announced the completion of a $946 million(1) project financing transaction to fully fund the project to production, and construction commenced on July 10th, 2014. First ore is scheduled to be delivered to the plant in the second half of 2016 with commercial production scheduled for the 2nd quarter of 2017.
In January 2013, Stornoway released the results of an Optimized Feasibility Study at Renard 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 in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), stand at 17.9 million carats. Total Indicated Mineral Resources, inclusive of the Mineral Reserve, stand at 27.1 million carats, with a further 16.85 million carats classified as Inferred Mineral Resources, and 25.7 to 47.8 million carats classified as non-resource exploration upside. Average annual diamond production is forecast at 1.6mcarats/year over the first 11 years of mining, at an average valuation of US$190/carat based on a March 2014 assessment by WWW International Diamond Consultants Ltd.
Readers are cautioned that the potential quality and grade of any target for further exploration is conceptual in nature, there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the target being delineated as a Mineral Resource. All kimberlites remain open at depth. Readers are referred to the technical report dated February 28th, 2013 in respect of the January 2013 Optimization Study, and the press release dated July 23, 2013 in respect of the July 2013 Mineral Resource estimate, for further details and assumptions relating to the project. Disclosure of a scientific or technical nature in this press release was prepared under the supervision of Patrick Godin, P.Eng. (Québec), Chief Operating Officer and Robin Hopkins, P.Geol. (NT/NU), Vice President, Exploration, both “qualified persons” under NI 43-101.
(1) For illustrative purposes. Assumes a C$: US$ conversion rate of $1.10. Actual proceeds of each financing tranche are measured at the C$: US$ exchange rate in effect the date the funds are received.
About Stornoway Diamond Corporation
Stornoway is a leading Canadian diamond exploration and development company listed on the Toronto Stock Exchange under the symbol SWY and headquartered in Montreal. Our flagship asset is the 100% owned Renard Diamond Project, on track to becoming Québec’s first diamond mine. Stornoway is a growth oriented company with a world class asset, in one of the world’s best mining jurisdictions, in one of the world’s great mining businesses.
Blackstone is one of the world’s leading investment firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, and the communities in which we work. We do this by using extraordinary people and flexible capital to help companies solve problems. Our asset management businesses, with over $300 billion in assets under management, include investment vehicles focused on private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis. Blackstone also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com. Follow Blackstone on Twitter @Blackstone.
The Orion Mine Finance Group is one of the world’s leading mining-focused investment businesses with approximately $1.8 billion under management specializing in providing flexible capital investment solutions to mining companies in the base and precious metals sector. Orion has demonstrated capability in debt, equity, convertibles, streaming, and royalty investments. In addition, the Orion Mine Finance team has experience in the physical metals markets, such as facilitating the purchase, metal financing, transporting, processing and selling of a mine’s output to end customers.
This press release contains “forward-looking information” within the meaning of Canadian securities legislation. This information and these statements, referred to herein as “forward-looking statements”, are made as of the date of this press release and the Corporation does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by law.
Forward-looking statements relate to future events or future performance and reflect current expectations or beliefs regarding future events and include, but are not limited to, statements with respect to: (i) the amount of mineral resources and exploration targets; (ii) the amount of future production over any period; (iii) net present value and internal rates of return of the mining operation; (iv) assumptions relating to recovered grade, average ore recovery, internal dilution, mining dilution and other mining parameters set out in the Feasibility Study or the Optimization Study; (v) assumptions relating to gross revenues, operating cash flow and other revenue metrics set out in the Feasibility Study or the Optimization Study; (vi) mine expansion potential and expected mine life; (vii) expected time frames for completion of permitting and regulatory approvals; (viii) expected time frames for completion of construction, start of mining and commercial production; (ix) future exploration plans; (x) future market prices for rough diamonds; (xi) the economic benefits of using liquefied natural gas rather than diesel for power generation; (xii) sources of and anticipated financing requirements; (xiii) the completion, effectiveness or availability, as the case may require, of the other elements of the Financing Transactions and the use of proceeds therefrom; and (xiv) the impact of the Financing Transactions on the Corporation’s operations, infrastructure, opportunities, financial condition, access to capital and overall strategy. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects”, “anticipates”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “schedule” or variations thereof or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are made based upon certain assumptions by Stornoway or its consultants and other important factors that, if untrue, could cause the actual results, performances or achievements of Stornoway to be materially different from future results, performances or achievements expressed or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future business prospects and strategies and the environment in which Stornoway will operate in the future, including the price of diamonds, anticipated costs and Stornoway’s ability to achieve its goals, anticipated financial performance, regulatory developments, development plans, exploration, development and mining activities and commitments and the impact of changes in commodity prices and foreign exchange rates on Stornoway’s results of operations. Although management considers its assumptions on such matters to be reasonable based on information currently available to it, they may prove to be incorrect. Certain important assumptions by Stornoway in making forward-looking statements include, but are not limited to: (i) required capital investment and estimated workforce requirements; (ii) estimates of net present value and internal rates of return; (iii) receipt of regulatory approvals on acceptable terms within commonly experienced time frames; (iv) anticipated timelines for completion of construction and the commencement of mine production; (v) market prices for rough diamonds and the potential impact on the Renard Diamond Project; (vi) Stornoway’s ability to comply with its obligations under the various agreements forming part of the Financing Transaction and to draw on the funding available under those financing elements; (vii) Stornoway’s interpretation of the geological drill data collected and its potential impact on stated Mineral Resources and mine life, and (viii) future exploration plans and objectives. Additional risks are described in Stornoway’s most recently filed Annual Information Form, annual and interim MD&A, and other disclosure documents available under the Corporation’s profile at: www.sedar.com.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that estimates, forecasts, projections and other forward-looking statements will not be achieved or that assumptions do not reflect future experience. We caution readers not to place undue reliance on these forward-looking statements as a number of important risk factors could cause the actual outcomes to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates, assumptions and intentions expressed in such forward-looking statements. These risk factors may be generally stated as the risk that the assumptions and estimates expressed above do not occur, including the assumption in many forward-looking statements that other forward-looking statements will be correct, but specifically include, without limitation, (i) risks relating to variations in the grade, kimberlite lithologies and country rock content within the material identified as mineral resources from that predicted; (ii) variations in rates of recovery and breakage; (iii) the uncertainty as to whether further exploration of exploration targets will result in the targets being delineated as mineral resources; (iv) developments in world diamond markets; (v) slower increases in diamond valuations than assumed;
(vi) risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar; (vii) increases in the costs of proposed capital and operating expenditures; (viii) increases in financing costs or adverse changes to the terms of available financing if any; (ix) tax rates or royalties being greater than assumed; (x) uncertainty of results of exploration in areas of potential expansion of resources; (xi) changes in development or mining plans due to changes in other factors or exploration results; (xii) changes in project parameters as plans continue to be refined; (xiii) risks relating to the receipt of regulatory approvals or the implementation of the existing Impact and Benefits Agreement with aboriginal communities; (xiv) the effects of competition in the markets in which Stornoway operates; (xv) operational and infrastructure risks; (xvi) timeframe and potential benefits relating to the issuance of an updated Mineral Resource Estimate in 2015; (xvii) the risk relating to Stornoway’s ability to comply with its obligations under the various agreements forming part of the Financing Transaction and to draw on the funding available under those financing elements; ; (xviii) future sales or issuances of Common Shares lowering the Common Share price and diluting the interest of existing shareholders; (xix) Stornoway being unable to meet its diamond delivery obligations under the Streaming Agreement, and (xx) the additional risks described in Stornoway’s most recently filed Annual Information Form, annual and interim MD&A and Stornoway’s anticipation of and success in managing the foregoing risks. Stornoway cautions that the foregoing list of factors that may affect future results is not exhaustive, and new, unforeseeable risks may arise from time to time.