Stock in Stornoway Diamond Corporation (TSE:SWY) was well down on the TSX today, falling to a low of 51 cents per share in intraday trading from a previous close of 58 cents, a drop of more than 10 per cent, in light of strike action halting construction of the road to its flagship Renard Diamond project.
The strike action, initiated by the Alliance of Unionized Construction Workers of Québec and announced Monday, covers all unionized construction workers in Québec, and has thus resulted in an interruption to the construction activities previously taking place on the 97km segment of the Renard Mine Road under development by Stornoway.
“At the present time, we do not anticipate a material impact on the overall development schedule, or budget for the Renard Mine Road, and we will continue to monitor the situation closely,” read a company statement issued Wednesday and signed by president and CEO Matt Manson issued on behalf of the board.
The Montreal-based company holds a 100 per cent interest in the Renard diamond project located near the Otish Mountains in north-central Quebec, which, when completed, will be the first diamond mine in Quebec.
Pre-production capital costs are estimated at $752 million. One of the crucial components of pre-production was the construction of the single lane mining road over the remaining 97km section that was not covered by the Ministry of Transport Quebec.
Construction of the road started in March 2013, ahead of the announced schedule due to favourable winter weather conditions. As recently as early June, Stornoway said in a press release that good progress had been made on the road through April and May, with overall completion reported as standing at 22 per cent with 7 of the road’s 16 permanent bridges in place. At the time of that announcement, the road was “well within the previously announced schedule.”
A road with year round access will be a first for diamond mining in Canada, and, according to the company website “will allow Renard to be developed and operated with significantly reduced costs and operating risk.”
The project was the subject of an optimization study early in this calendar year, which indicated its potential to become a significant producer of high value rough diamonds over a long mine life. The NI 43-101 reported a probable mineral reserve of 17.9 million carats, with a further 17.5 million carats classified as inferred mineral resources and an additional 23.5 to 48.5 million carats classified as non-resource exploration upside. The project’s life of mine operating cost is pegged at $57.63 a tonne giving a 67 per cent operating margin over an initial 11 year mine life.
Stock in Stornoway was continuing to trade down on the TSX, hitting 53 cents a share at 2.38pm EST.