Stornoway Diamond Corp (TSE:SWY) Friday said that it has completed a C$77 million debt financing deal with the Québec Ministère des Finances et de l'Économie to build an all-season access road to the Renard diamond project.
The financing and a previously announced framework agreement, completed through its subsidiary Les Diamants Stornoway, are designed to ensure all-season road access to Renard during 2013.
On the basis of the construction schedule, Stornoway said it expects to request an initial payment of the loan this month.
The news comes just a day after Stornoway announced it had received the principal regulatory approval required to start mine construction following more than two years of formal environmental study, community engagement and public consultation.
Additional terms of the financing agreement include an annual interest rate on the credit facility of 3.35 per cent, for a term of 15 years, with repayment beginning four years following the first disbursement, and deferrable for up to two years if there is any delay in commercial production at Renard past July 1, 2016.
Stornoway said that Québec is also providing it with an additional overrun facility of up to $7.7 million, at an annual interest rate of 6.3 per cent.
As part of the deal, the company is aiming to complete construction of the Renard Mine road no later than June 30, 2015.
The Renard mine road is a 240-kilometre-long extension of Route 167 into the Otish Mountains region of Québec, providing all-season road access to Renard by way of the communities of Mistissini and Chibougamau.
Construction began in February, with 143 kilometres being undertaken by the Québec Ministère des Transports (MTQ), while Stornoway will be responsible for the remaining 97 kilometres starting in April 2013.
The MTQ has said it will complete a winter road by March 2013, allowing temporary access to Renard and the mobilization of fuel, road construction equipment and camps.
Stornoway expects the all-season road access to be available starting in the fourth quarter of 2013, with mine construction set to follow immediately after.
Maintenance costs on the remaining 97 kilometres of road will be paid by Stornoway, at an estimated $77 million, including a 15 per cent contingency, it said.
The Renard diamond project is located in the James Bay region of North-Central Québec. In November 2011, Stornoway released the results of a feasibility study for Renard that highlighted the potential of the project to become a significant producer of high value rough diamonds over a long mine life.
NI 43-101 compliant probable mineral reserves stand at 18.0 million carats, with a further 17.5 million carats classified as inferred mineral resources, and 23.5 to 48.5 million carats classified as non-resource exploration upside. All kimberlites remain open at depth.
Pre-production capital cost stands at an estimated $802 million, with a life of mine operating cost of $54.71 per tonne giving a 68 per cent operating margin over an initial 11 year mine life.
The Canadian diamond exploration and development company's flagship asset is on track to becoming Québec’s first diamond mine. The company also maintains an active diamond exploration program with both advanced and grassroots programs in the most prospective regions of Canada.