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Expansion of Drilling Program Leads to 1400% Jump in Renard’s NPV
Posted by David
Stornoway Diamond Corp. released its updated preliminary assessment for its Renard project a few weeks ago. SWY owns 50% of the Foxtrot property with SOQUEM. Renard is one of three kimberlite occurrences on the property, with Lynx and Hibou being the other two. The bottom line of this report is an increase in the project’s NPV to CAN$885 million.
The assessment incorporates and effectively quantifies the earlier reported extension of the Renard-2 body. The carats contained by this kimberlite is approximately 4x the initial amount reported almost two years ago, and the body remains open at depth. This means that the full extent of the mineable portion of the body is less well known, leaving a significant upside that is yet to be determined. The other major Renard pipe remain open at depth as well (see image).
Modeled Renard orebodies from PDAC 2010 presentation.
A release from the middle of April has shown that SWY and SOQUEM are looking at having similar success at the Renard 65, 3, and 4 bodies. Expansions of the resource at Foxtrot such as these one have led to the proposed mine life expanding from under a dozen years to twenty-five.
Investors jumped on this news, propelling the stock as high at CAN$0.80/share before settling in the mid-sixty cent range. I could be not long now before SWY stock begins to creep into the $1 range. Further reports such as these and burgeoning institutional investor interest will be crucial factors in this stock’s rise.
One concern with these studies concerning Renard is the value of the US dollar. Diamonds are valued and sold rough in $US/c. The rise in the Canadian dollar against the American is going to dig into SWY’s bottom line (and any diamond mine in Canada). As costs are in CAN$ and sales in $US, the modeled margins will be narrower if the diamond prices do not increase in adjustment. The aforementioned preliminary report assumes US$1 = CAN$1.11 and a diamond valuation of US$117/c.
Not being an arctic diamond mine, the relatively low production cost of <CAN$50/t will go great lengths to insulate SWY from most fluctuations in the exchange rate. Along with Shore Gold’s Star-Orion project in Saskatchewan, the recession has left Renard as one of two Canadian diamond projects with a reasonable chance of becoming a mine in the next fives years.
Disclaimer: The author holds shares of SWY. This article is based on the personal opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
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