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Stornoway for Sale Again Following Significant Losses

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LEAH MEIROVICH • 22-11-2023

Stornoway Diamonds is seeking a buyer after the weak market forced the miner to enter insolvency for the second time in just over four years.

Deloitte Corporate Finance is conducting the sale and investment solicitation process (SISP) for the Stornoway’s entire business, property and assets, the professional services firm said Tuesday. The miner, which operates the Renard deposit in Canada, has insufficient liquidity to operate and is in “a precarious financial situation,” Deloitte explained in a filing at the Superior Court of Quebec.

Stornoway reported a net loss of CAD 13.1 million ($9.6 million) for the nine months that ended September 30, according to the court documents. That compares to a profit of CAD 42.2 million ($30.7 million) for the full year of 2022.

“[India’s] unilateral ongoing import freeze and ongoing downward pressure on price[s] since March 2023…have resulted in a dramatic loss of revenue for Stornoway, and [have] seriously impaired Stornoway’s ability to sell its inventory at acceptable and profitable market prices,” the filing stated.

Prices for the company’s rough have been progressively decreasing throughout the year, Stornoway noted. From a total of six sales held since January, the miner has seen prices fall from $118 per carat to $82 per carat.

“Management estimates that Stornoway’s working capital is not sufficient to allow it to meet its financial obligations, commitments and necessary budgeted expenditures for the foreseeable future,” the filing said.

Last month, Stornoway halted operations at Renard, laid off 425 of its 500 employees, and filed for creditor protection as it sought to weather the slowdown.

This is not the first time Stornoway has faced liquidity issues. In 2019, the miner was forced to sell the business to its major lenders after accumulating debt it attributed to “continued downward pressure” on the rough market.

Stornoway currently lists assets of about CAD 287.3 million ($209.6 million) from inventory, property and plant equipment, cash and other sources.

Image: Rough diamonds from the Renard mine. (Stornoway Diamonds)

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