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Share Name | Share Symbol | Market | Type |
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DDC Enterprise Limited Class A | NYSE:DDC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 14.24 | 0 | 01:00:00 |
Strong sales and Adjusted EBITDA driven by high-value Ekati production; robust project pipeline advancing
Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the “Company” or “Dominion”) today reported its first quarter operational and financial results for the three months ending April 30, 2017. Unless otherwise indicated, all references to “first quarter,” “Q1 fiscal 2018” and “Q1 2018” refer to the three months ended April 30, 2017, all references to “Q1 fiscal 2017” and “Q1 2017” refer to the three months ended April 30, 2016, and all financial information is presented in US dollars.
Highlights
“The significant year-over-year improvement in sales, gross margin and Adjusted EBITDA is the result of our transition to high-value production at Ekati, and continued solid performance at Diavik,” said Jim Gowans, Chairman of the Board. “We are building upon the strong momentum that started at the beginning of this year, while advancing our project pipeline to support longer-term value generation. With Misery Deep now approved for construction, we will benefit from an enhanced mid-term production and cash flow profile, while continuing to optimize our operations and maximize the value of the diamonds we sell.”
(1)The term EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-IFRS measure. Adjusted EBITDA
removes the effects of impairment charges, foreign exchange gains (losses), exploration costs and the gain on the sale of the Toronto office building from EBITDA. See “Non-IFRS Measures” for additional information.
Consolidated Performance Review (Ekati mine 100% and Diavik mine 40%)Financial Summary
(in millions of US dollars, except where otherwise noted)Three monthsended April 30,2017
Three monthsended April 30,2016
Sales(1) $ 211.0 $ 178.3 Carats sold (000s) 2,333 2,600 Average price per carat sold ($/carat) $ 90 $ 69 Cash cost of sales per carat sold (2) ($/carat) $ 45 $ 50 Gross margin $ 30.8 $ (18.8) Gross margin (%) 15% (11%) Selling, general and administrative expenses $ 8.3 $ 8.0 Current and deferred income tax expense (recovery) $ 19.1 $ (30.6) Net income (loss) $ (7.8) $ (5.3) Adjusted EBITDA $ 97.0 $ 54.3 Adjusted EBITDA margin (2) (%) 46% 30% Depreciation and amortization $ 75.8 $ 61.5 Earnings (loss) per share attributable to shareholders ($/share) $ (0.09) $ (0.01) Cash provided from operating activities before changes innon-cash operating working capital(2) $ 73.5 $ 11.2 Free cash flow(2) $ (15.5) $ (90.0) (1)Q1 fiscal 2017 sales exclude 0.1 million carats produced from Misery Main and Pigeon pipes during the pre-commercial production period for proceeds of $4.4 million.
(2)The terms “Cash cost of sales per carat sold”, “Adjusted EBITDA margin”, “Cash provided from operating activities before changes in non-cash operating working capital” and “Free cash flow” do not have a standardized meaning according to IFRS. The Company defines cash cost of sales per carat sold as the cash component of cost of sales, excluding depreciation and amortization divided by the total carats sold. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total sales. Cash provided from operating activities before changes in non-cash operating working capital is defined as net cash from operating activities less changes in non-cash operating working capital. Free cash flow is defined as net cash from operating activities, less sustaining capital expenditure and less growth and exploration capital expenditure. See “Non-IFRS Measures” for additional information.
Financial Performance
Net income (loss)
In Q1 fiscal 2018, the Company reported a consolidated net loss attributable to shareholders of $7.8 million, or $0.09 per share. The net loss includes a foreign currency exchange impact on income tax expense of $13.6 million, or $0.16 per share, and restructuring costs of $2.3 million, or $0.02 per share, relating to the relocation of the corporate head office. Relative to Q1 fiscal 2017, financial performance was also impacted by:
Adjusted EBITDA, Cash Flow and Balance Sheet
Operational Summary
(in US dollars, except where otherwise noted)
Three months endedApril 30, 2017
Three months endedApril 30, 2016
Carats recovered (000s)
2,146
1,830
Cash cost per tonne processed (1) ($/tonne)
$
85
$
81
Total cost per tonne processed (1) ($/tonne)
$
149
$
129
Cash cost per carat produced (1) ($/carat)
$
46
$
54
Total cost per carat produced (1) ($/carat)
$
77
$
84
(1)Cash cost per tonne processed and cash cost per carat produced are non-IFRS measures, and are calculated by dividing cash cost of production by total tonnes processed and total carats produced, respectively. Cash cost of production is a non-IFRS measure, and includes mine site operating costs such as mining, processing and administration, other cash costs relating to sorting and valuation activities and private royalties, but is exclusive of amortization, capital, and exploration and development costs. Total cost of production is a non-IFRS measure and is comprised of cash cost of production plus depreciation and amortization. Total cost per tonne processed and total cost per carat produced are non-IFRS measures, and are calculated by dividing total cost of production by total tonnes processed and total carats produced, respectively. See “Non-IFRS Measures” for additional information.
Diamond Market
Mine
Feed type
February 2017sales cycleaverage priceper carat
Average %change toMay 2017sales cycle(1)
Ekati Diamond Mine
Koala
$
280
3%
Misery Main
53
Misery Southwest Extension
37
Pigeon
138
Diavik Diamond Mine
A-154 South
111
1%
A-154 North
147
A-418
80
COR(2)
40
(1)
The average price changes from February 2017 to May 2017 represent net changes in prices for all goods from each mine, both higher-value and lower-value. Prices for the higher-value and lower-value market segments can move independently of one another, depending on relative demand. As such, strengthening prices in one market segment can offset weakening prices in another, resulting in minimal average price change.
(2)
COR refers to coarse ore rejects, which are not classified as mineral reserves and do not have demonstrated economic viability.
Ekati Mine Performance Review (100% basis)
Financial Performance
(in millions US dollars, except where otherwise noted)Three monthsended April 30,2017
Three monthsended April 30,2016
Sales(1)
$
137.7
$
105.1
Carats sold (000s)
1,834
1,545
Average price per carat sold ($/carat)
$
75
$
68
Cash cost of sales per carat sold ($/carat)
$
39
$
59
Gross margin $9.8
$
(31.8)
Gross margin %7%
(30%) Adjusted EBITDA$
64.3 $ 25.9 Adjusted EBITDA margin %47%
25% Depreciation and amortization $56.0
$
38.9
(1)
Q1 fiscal 2017 sales exclude 0.1 million carats produced from Misery Main and Pigeon pipes during the pre-commercial production period for proceeds of $4.4 million.
Operational Performance
For the three months ended April 30, 2017 For the three months ended April 30, 2016 PipeTonnesProcessed(000s)
Carats(1)(000s) Grade(1)(carats/tonne)TonnesProcessed(000s)
Carats(1)(000s) Grade(1)(carats/tonne) Koala 500 221 0.44 314 197 0.63 Misery Main258
1,115 4.30 75 204 2.72 Pigeon 148 52 0.35 248 109 0.44 Misery Satellites (2) – – – 335 566 1.69 Total(3) 906 1,388 1.53 972 1,076 1.11(1)
As different kimberlite sources are blended during processing, carats and grade per pipe are estimated using the block models for the tonnes processed from each pipe, adjusted for the overall reconciliation of total carats recovered against the model. The total carats produced include all incremental production arising as a result of the changes made to the Ekati process plant to improve diamond liberation
(2)
The Misery Satellites include the Misery South and Southwest satellite pipes, which are inferred mineral resources, and Misery Northeast material. During the three months ended April 30, 2016, approximately 0.6 million carats were recovered from the processing of approximately 0.3 million tonnes of material from Misery South, Southwest extension and Northeast pipes. The Northeast material is not included in the mineral reserves or mineral resources, and is therefore incremental production.
(3)
Figures may not add due to rounding.
(in US dollars, except where otherwise noted)
Three monthsended April 30,2017
Three monthsended April 30,2016
Waste tonnes mined (000s)
6,824
5,406
Kimberlite tonnes mined (000s)
863
1,651
Tonnes processed (000s)
906
972
Carats recovered (000s)
1,388
1,076
Grade (carats/tonne)
1.53
1.11
Cash cost per tonne processed ($/tonne)
$
73
$
67
Total cost per tonne processed ($/tonne)
$
128
$
104
Cash cost per carat produced ($/carat)
$
49
$
62
Total cost per carat produced ($/carat)
$
84
$
94
Diavik Mine Performance Review (40% basis)
Financial Performance
(expressed in millions US dollars, except where otherwise noted)Three monthsended April 30,2017
Three monthsended April 30,2016
Sales
$
73.3
$
73.1
Carats sold (000s)
499
1,055
Average price per carat sold ($/carat)
$
147
$
69
Cash cost of sales per carat sold ($/carat)
$
66
$
36
Gross margin $ 21.0$
13.0 Gross margin % 29% 18% Adjusted EBITDA$
40.3 $ 34.5 Adjusted EBITDA margin % 55% 47% Depreciation and amortization $19.5
$
22.4
Operational Performance
For the three months ended March 31, 2017 For the three months ended March 31, 2016 PipeTonnesProcessed(000s tonnes)
Carats(000s)Grade(carats/tonne)
TonnesProcessed(000s tonnes)
Carats(000s) Grade(carats/tonne) A-154 South 40 1323.25
49 142 2.90 A-154 North 61 1632.65
71 166 2.34 A-418 110 4474.08
102 430 4.22 COR 1 16 – 1 16 – Total (1) 212 758 3.50(2) 223 754 3.32(2)(1)
Figures may not add due to rounding
(2)
Grade has been adjusted to exclude COR(in US dollars, except where otherwise noted)
Three monthsended April 30,2017
Three monthsended April 30,2016
Waste tonnes mined (000s)
40
36
Kimberlite tonnes mined (000s)
232
209
Tonnes processed (000s)
212
223
Carats recovered (000s)
758
754
Grade (carats/tonne)
3.50
3.32
Cash cost per tonne processed ($/tonne)
$
133
$
140
Total cost per tonne processed ($/tonne)
$
235
$
241
Cash cost per carat produced ($/carat)
$
42
$
44
Total cost per carat produced ($/carat)
$
66
$
71
Diamond Inventory
(in millions of US dollars, except where otherwise noted)
April 30, 2017
January 31, 2017
Consolidated Diamond Inventory (Ekati mine 100%, Diavik mine 40%)Carats in inventory available-for-sale (000s)
3,551
3,674
Estimated market value of inventory available-for-sale
$
200
$
212
Estimated average market value per carat available-for-sale ($/carat)
$
56
$
58
Cost of inventory available-for-sale
$
159
$
182
Ekati Diamond Inventory (100% basis)Carats in inventory available-for-sale (000s)
2,491
3,046
Estimated market value of inventory available-for-sale
$
125
$
156
Estimated average market value per carat available-for-sale ($/carat)
$
50
$
51
Cost of inventory available-for-sale
$
115
$
143
Diavik Diamond Inventory (40% basis)
Carats in inventory available-for-sale (000s)
1,060
628
Estimated market value of inventory available-for-sale
$
75
$
56
Estimated average market value per carat available-for-sale ($/carat)
$
71
$
89
Cost of inventory available-for-sale
$
44
$
38
Development Projects
Jay
Sable
Misery Deep
Fox Deep
A-21
Exploration Program
Ekati
Diavik
Lac de Gras Joint Venture
Glowworm
Capital Expenditures (Ekati mine 100% and Diavik mine 40%)
(in millions of US dollars)Three monthsended April 30,2017
Three monthsended April 30,2016
Ekati sustaining capital expenditures
$
16.6
$
18.6
Ekati production stripping expenditures
27.0
3.1
Diavik sustaining capital expenditures
4.3
6.0
Total sustaining capital expenditures 47.9 27.7Sable expenditures
11.0
9.6
Lynx expenditures
3.7
13.7
Jay expenditures
2.1
23.4
Misery expenditures
-
19.8
A-21 expenditures
9.2
12.0
Other expenditures
3.3
5.2
Total growth capital expenditures 29.3 83.7Reconciliation to capital cash additions:
Capitalized depreciation
(3.4)
(2.7)
Capital accruals
(1.6)
3.0
Total cash capital additions $ 72.2 $ 111.7During the first quarter, the Company invested $72.2 million in property, plant and equipment, of which $59.6 million related to the Ekati mine and $12.6 million related to the Diavik mine. Expenditures related primarily to construction and development of new kimberlite pipes at both mines, as well as excess waste stripping in open pits which is capitalized as production stripping.
On June 5, 2017, an agreement was reached with Archon Minerals Limited, to convert its participating interest in the Buffer Zone at the Ekati mine to a royalty equal to 2.3% of all future gross revenue from diamonds produced from the Buffer Zone. As a result of this transaction, Dominion’s ownership interest in the Buffer Zone increased to 100.0%.
Conference Call and Webcast
Beginning at 11:00 AM (ET) on Tuesday, June 13, 2017, the Company will host a conference call for analysts, investors and other interested parties. Listeners may access a live broadcast of the conference call on the Company's website at www.ddcorp.ca or by dialing 844-249-9383 within North America or 270-823-1531 from international locations and entering the conference ID 13700907.
An online archive of the broadcast will be available by accessing the Company's website at www.ddcorp.ca. A telephone replay of the call will be available two hours after the call through 2:00 PM (ET), Tuesday, June 27, 2017, by dialing 855-859-2056 within North America or 404-537-3406 from international locations and entering the conference ID 13700907.
Management’s Discussion and Analysis and Financial Statements
Complete Management’s Discussion and Analysis and Financial Statements can be found on Dominion’s website at: http://www.ddcorp.ca/investors/reports/quarterly-reports.
Condensed Consolidated Interim Balance Sheets
(unaudited) (expressed in thousands of US dollars)April 30,2017
January 31,2017
ASSETS Current assets Cash and cash equivalents (note 4) $ 131,168 $ 136,168 Accounts receivable 17,566 13,946 Inventory and supplies (note 5) 446,700 412,227 Other current assets 32,639 29,765 Income taxes receivable 14,919 17,720 642,992 609,826 Property, plant and equipment 1,311,773 1,295,584 Restricted cash (note 4) 47,982 65,742 Other non-current assets 21,130 21,362 Deferred income tax assets 16,520 11,362 Total assets $ 2,040,397 $ 2,003,876 LIABILITIES AND EQUITY Current liabilities Trade and other payables $ 141,989 $ 108,866 Dividends payable 16,138 – Employee benefit plans 1,943 1,192 Income taxes payable 71,460 54,710 Current portion of loans and borrowings 10,556 10,556 242,086 175,324 Deferred income tax liabilities 160,194 155,380 Employee benefit plans 17,208 15,911 Provisions 331,455 328,356 Total liabilities 750,943 674,971 Equity Share capital 465,848 478,526 Contributed surplus 31,117 31,667 Retained earnings 691,540 718,298 Accumulated other comprehensive loss (8,917 ) (9,622 ) Total shareholders’ equity 1,179,588 1,218,869 Non-controlling interest 109,866 110,036 Total equity 1,289,454 1,328,905 Total liabilities and equity $ 2,040,397 $ 2,003,876The notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Income (Loss)
(unaudited) (expressed in thousands of US dollars, except shares and per share amounts
Three monthsended April30, 2017
Three monthsended April30, 2016
Sales $ 210,978 $ 178,259 Cost of sales 180,205 197,077 Gross margin 30,773 (18,818 ) Selling, general and administrative expenses 8,280 8,036 Restructuring costs (note 11) 2,275 – Operating profit20,218 (26,854 ) Finance expenses (3,631 ) (2,488 ) Exploration costs (736 ) (3,581 ) Finance and other income 989 371 Foreign exchange (loss) gain (5,565 ) (3,360 ) Profit (loss) before income taxes 11,275 (35,912 ) Current income tax expense 21,139 6,676 Deferred income tax recovery (2,026 ) (37,286 ) Net (loss) income $ (7,838 ) $ (5,302 ) Net (loss) income attributable to Shareholders $ (7,910 ) $ (1,044 ) Non-controlling interest 72 (4,258 ) (Loss) earnings per share Basic (0.09 ) (0.01 ) Diluted (0.09 ) (0.01 ) Basic weighted average number of shares outstanding 83,648,017 85,310,368
The notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Cash Flows
(unaudited) (expressed in thousands of US dollars)Threemonthsended April30, 2017
Threemonthsended April30, 2016
Cash provided by (used in) OPERATING Net (loss) income $ (7,838 ) $ (5,302 ) Depreciation and amortization 75,809 58,444 Deferred income tax recovery (2,026 ) (37,286 ) Current income tax expense 21,139 6,676 Finance expenses 3,631 2,488 Stock-based compensation (406 ) 817 Other non-cash items (14,480 ) 3,530 Unrealized foreign exchange gain (2,138 ) 9,340 Gain on disposition of assets – 235 Impairment losses on inventory – 19,603 Interest paid (77 ) (94 ) Income and mining taxes paid (99 ) (47,285 )Change in non-cash operating working capital
(16,840 ) 6,795 Net cash from operating activities 56,675 17,961 FINANCING Repayment of interest-bearing loans and borrowings – (185 ) Distributions to and contributions from minority partners, net – (3,986 ) Issue of common shares, net of issue 262 127 Share repurchase (13,084 ) – Cash used in financing activities (12,822 ) (4,044 ) INVESTING Decrease in restricted cash 14,596 – Net proceeds from preproduction sales – 3,741 Purchase of property, plant and equipment (72,229 ) (111,656 ) Other non-current assets 230 1,436 Cash used in investing activities (57,403 ) (106,479 ) Foreign exchange effect on cash balances 8,550 (1,022 ) Decrease in cash and cash equivalents (5,000 ) (93,584 ) Cash and cash equivalents, beginning of period 136,168 320,038 Cash and cash equivalents, end of period $ 131,168 $ 226,454 Change in non-cash operating working capital Accounts receivable (3,162 ) (465 ) Inventory and supplies (43,715 ) (12,240 ) Other current assets (2,640 ) (8,776 ) Trade and other payables 31,926 30,215 Employee benefit plans 751 (1,939 ) $ (16,840 ) $ 6,795The notes are an integral part of these condensed consolidated interim financial statements.
Non-IFRS MeasuresThis news release uses a number of financial measures, including: cash cost of production, total cost of production, cash cost and total cost per tonne processed, cash cost and total cost per carat produced, cash cost of sales per carat sold, Adjusted EBITDA, free cash flow, sustaining capital expenditure, and growth capital expenditure. These measures are used to monitor and evaluate the performance of the Company, are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not prescribed by IFRS and will differ from measures determined in accordance with IFRS. Other companies may calculate these non-IFRS financial measures differently. These non-IFRS measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. Please refer to the section “Non-IFRS Measures” in the Company’s Management’s Discussion and Analysis for the three months ended April 30, 2017, for further details, including a reconciliation of each such measure to its most directly comparable measure calculated in accordance with IFRS.
Forward-Looking InformationInformation included herein, including information about expected sales and Adjusted EBITDA, diamond pricing, estimated production from, and exploration and development activities at, the Ekati mine and the Diavik mine, and expectations concerning the diamond industry, constitutes forward-looking information or statements within the meaning of applicable securities laws. Forward-looking information is based on certain factors and assumptions including, among other things, the current mine plan for each of the Ekati mine and the Diavik mine; mining, production, construction and exploration activities at the Ekati mine and the Diavik mine; currency exchange rates; world and US economic conditions; future diamond prices; and the level of worldwide diamond production. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what the Company currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining operations, risks associated with joint venture operations, risks associated with the remote location of and harsh climate at the Company’s mining properties, variations in mineral reserve and mineral resource estimates, grade estimates and expected recovery rates, failure of plant, equipment or processes to operate as anticipated, risks associated with regulatory requirements, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate, cash flow and liquidity risks, and uncertainties related to the Company’s strategic review process. Actual results may vary from the forward-looking information. Readers are cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this disclosure, and should not rely upon this information as of any other date. While the Company may elect to, it is under no obligation and does not undertake to, update or revise any forward-looking information, whether as a result of new information, further events or otherwise at any particular time, except as required by law. Additional information concerning factors that may cause actual results to materially differ from those in such forward-looking statements is contained in the Company's filings with Canadian and United States securities regulatory authorities and can be found at www.sedar.com and www.sec.gov, respectively.
About Dominion Diamond CorporationDominion Diamond Corporation is a Canadian mining company and one of the world’s largest producers and suppliers of premium rough diamond assortments to the global market. The Company operates the Ekati Diamond Mine, in which it owns a controlling interest, and owns 40% of the Diavik Diamond Mine, both of which are located in the low political risk environment of the Northwest Territories in Canada. It also has world-class sorting and selling operations in Canada, Belgium and India.
For more information, please visit www.ddcorp.ca.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170612006270/en/
Investors:Dominion Diamond CorporationJacqueline Allison, 416-205-4371Vice-President, Investor Relationsjacqueline.allison@ddcorp.caorCanadian Media Contact:DFH Public AffairsIan Hamilton, 416-206-0118 x222orUS Media Contact:Gagnier CommunicationsDan Gagnier, 646-569-5897
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