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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 |
Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the “Company” or “Dominion”) today reported its second quarter operational and financial results for the three and six months ending July 31, 2017. Unless otherwise indicated, all references to “second quarter,” “Q2 fiscal 2018” and “Q2 2018” refer to the three months ended July 31, 2017, and all references to “Q2 fiscal 2017” and “Q2 2017” refer to the three months ended July 31, 2016. All financial information is presented in US dollars.
Highlights
“As expected, we continue to see the benefit of our transition to high-value production at Ekati, and stable performance at Diavik,” said Jim Gowans, Chairman of the Board. “The transaction that we announced in July with The Washington Companies will support continued mine development and operation, benefitting Dominion’s stakeholders over the long-term.”
Consolidated Performance Review (Ekati mine 100% basis and Diavik mine 40% basis)
Financial Summary
(in millions of US dollars, except where otherwise noted) Three months ended July 31 Six months ended July 312017
20162017
2016 Sales $ 239.8 $ 160.0 $ 450.8 $ 338.2 Carats sold (000s) 3,643 1,341 5,976 3,940 Average price per carat sold ($/carat) $ 66 $ 119 $ 75 $ 86 Cash cost of sales per carat sold(1) ($/carat) $ 32 $ 74 $ 37 $ 58 Gross margin $ 37.7 $ 0.9 $ 68.4 $ (18.0 ) Gross margin (%) 16 % 1 % 15 % (5 %) Selling, general and administrative expenses $ 7.4 $ 9.2 $ 15.6 $ 17.2 Mine standby costs $ – $ 22.0 $ – $ 22.0 Transaction costs $ 11.2 $ – $ 11.2 $ – Current and deferred income tax expense (recovery) $ (15.2 ) $ – $ 3.9 $ (30.6 ) Net (loss) income $ 31.1 $ (37.9 ) $ 23.2 $ (43.2 ) Adjusted EBITDA $ 115.2 $ 38.6 $ 212.2 $ 92.9 Adjusted EBITDA margin(1) (%) 48 % 24 % 47 % 27 % Depreciation and amortization $ 85.1 $ 62.6 $ 160.9 $ 124.1 Earnings (loss) per share attributable to shareholders ($/share) $ 0.39 $ (0.39 ) $ 0.29 $ (0.40 ) Cash from operating activities before changes in non-cash operating working capital (1) $ 63.9 $ 23.9 $ 137.4 $ 35.1 Free cash flow $ 42.8 $ (20.9 ) $ 27.3 $ (110.9 ) (1) The terms “cash cost of sales per carat sold”, “Adjusted EBITDA margin” and “cash from operating activities before changes in non-cash operating working capital” 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 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. See “Non-IFRS Measures” for additional information.Financial Performance
Net income (loss)
In Q2 fiscal 2018, the Company reported consolidated net income attributable to shareholders of $31.9 million, or $0.39 per share. This includes a foreign currency exchange impact on income tax resulting in an income tax recovery of $23.8 million, or $0.29 earnings per share, and transaction costs of $11.2 million or $0.10 loss per share after tax, relating to the strategic review and the Arrangement. Relative to Q2 fiscal 2017, financial performance was also impacted by:
Adjusted EBITDA, Cash Flow and Balance Sheet
Operational Summary
(in US dollars, except where otherwise noted) Three months ended July 31 Six months ended July 31 2017 2016 2017 2016 Carats produced (000s) 2,564 1,488 4,710 3,318 Cash cost per tonne processed (1) ($/tonne) $ 74 $ 82 $ 79 $ 81 Total cost per tonne processed (1) ($/tonne) $ 136 $ 141 $ 142 $ 134 Cash cost per carat produced (1) ($/carat) $ 36 $ 47 $ 41 $ 51 Total cost per carat produced (1) ($/carat) $ 64 $ 77 $ 70 $ 81 (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 comprises 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 and Price Update
Ekati Mine Performance Review (100% basis)
Financial Performance
(in millions of US dollars, except whereotherwise noted)
Three months ended July 31 Six months ended July 312017
20162017
2016 Sales $ 152.2 $ 83.3 $ 289.9 $ 188.4 Carats sold (000s) 2,626 668 4,460 2,213 Average price per carat sold ($/carat) $ 58 $ 125 $ 65 $ 85 Cash cost of sales per carat sold ($/carat) $ 32 $ 99 $ 35 $ 71 Gross margin $ 7.6 $ (22.8 ) $ 17.3 $ (54.6 ) Gross margin (%)5%
(27%
)
6%
(29%
)
Mine standby costs $ – $ 22.0 $ – $ 22.0 Adjusted EBITDA $ 68.1 $ 4.1 $ 132.4 $ 30.0 Adjusted EBITDA margin (%)45%
5%
46%
16%
Depreciation and amortization $ 62.0 $ 43.5 $ 118.0 $ 82.4
Operational Performance
For the three months ended July 31, 2017
For the three months ended July 31, 2016 Tonnes Tonnes Pipe ProcessedCarats(1)
Grade(1)
ProcessedCarats(1)
Grade(1)
(000s) (000s) (carats/tonne) (000s) (000s) (carats/tonne) Koala 397 167 0.42 205 116 0.57 Misery Main 358 1,522 4.26 135 459 3.41 Pigeon 209 79 0.38 157 64 0.41Misery Satellites(2)
23 50 2.21 104 217 2.08 Total(3) 987 1,818 1.84 601 856 1.43 (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 produced 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 July 31, 2017, there was minimal production from the Misery Satellites. During the three months ended July 31, 2016, approximately 0.2 million carats were produced from the processing of approximately 0.1 million tonnes of material from Misery South and Southwest extension pipes. (3) Figures may not add due to rounding. For the six months ended July 31, 2017 For the six months ended July 31, 2016 Tonnes Tonnes Pipe processed CaratsGrade(1)
Processed Carats Grade (000s) (000s) (carats/tonne) (000s) (000s) (carats/tonne) Koala 897 388 0.43 518 313 0.60 Misery Main 616 2,637 4.28 209 663 3.17 Pigeon 357 132 0.37 406 173 0.43 Misery Satellites(2) 23 50 2.21 440 783 1.78 Total(3) 1,893 3,207 1.69 1,573 1,932 1.23 (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 produced 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 six months ended July 31, 2017, there was minimal production from the Misery Satellites. During the six months ended July 31, 2016, approximately 0.8 million carats were produced from the processing of approximately 0.4 million tonnes of material from Misery South, Southwest extension and Northeast pipes.(3)
Figures may not add due to rounding. (in US dollars, except where otherwise noted) Three months ended July 31 Six months ended July 312017
20162017
2016 Waste tonnes mined (000s) 6,404 5,021 13,228 10,427 Kimberlite tonnes mined (000s) 1,259 1,447 2,122 3,098 Tonnes processed (000s) 987 601 1,893 1,573 Carats produced (000s) 1,818 856 3,207 1,932 Grade (carats/tonne) 1.84 1.43 1.69 1.23 Cash cost per tonne processed ($/tonne) $ 65 $ 63 $ 69 $ 65 Total cost per tonne processed ($/tonne) $ 122 $ 112 $ 125 $ 107 Cash cost per carat produced ($/carat) $ 36 $ 45 $ 42 $ 54 Total cost per carat produced ($/carat) $ 66 $ 79 $ 74 $ 87Diavik Mine Performance Review (40% basis)
Financial Performance
(in millions of US dollars, except whereotherwise noted)
Three months ended July 31 Six months ended July 312017
20162017
2016 Sales $ 87.6 $ 76.7 $ 160.9 $ 149.8 Carats sold (000s) 1,017 673 1,516 1,727 Average price per carat sold ($/carat) $ 86 $ 114 $ 106 $ 87 Cash cost of sales per carat sold ($/carat) $ 34 $ 50 $ 45 $ 42 Gross margin $ 30.1 $ 23.7 $ 51.1 $ 36.7 Gross margin (%) 34% 31% 32% 25% Adjusted EBITDA $ 52.9 $ 42.0 $ 93.2 $ 76.5 Adjusted EBITDA margin (%) 60% 55% 58% 51% Depreciation and amortization $ 22.7 $ 19.2 $ 42.2 $ 41.6Operational Performance
For the three months ended June 30, 2017
For the three months ended June 30, 2016 Tonnes Tonnes Processed Carats Grade Processed Carats Grade Pipe(000s tonnes)
(000s)
(carats/tonne)
(000s tonnes)
(000s)
(carats/tonne)
A-154 South 53 177 3.34 57 164 2.85 A-154 North 68 173 2.54 64 146 2.29 A-418 101 396 3.92 92 308 3.33 COR – – – 1 14 – Total (1) 222 746 3.36(2) 214 6322.89(2)
(1)
Figures may not add due to rounding
(2)
Grade has been adjusted to exclude COR
For the six months ended June 30, 2017
For the six months ended June 30, 2016 Tonnes Tonnes Processed Carats Grade Processed Carats Grade Pipe(000s tonnes)
(000s)
(carats/tonne)
(000s tonnes)
(000s)
(carats/tonne)
A-154 South 94 309 3.30 106 306 2.88 A-154 North 130 336 2.59 135 312 2.32 A-418 210 842 4.00 195 738 3.79 COR 1 16 – 1 30 – Total (1) 435 1,503 3.43(2) 437 1,386 3.11(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 months ended June 30 Six months ended June 302017
20162017
2016 Waste tonnes mined (000s) 40 32 80 67 Kimberlite tonnes mined (000s) 232 233 464 442 Tonnes processed (000s) 222 214 435 437 Carats produced (000s) 746 632 1,503 1,386 Grade (carats/tonne) (1) 3.36 2.89 3.43 3.11 Cash cost per tonne processed ($/tonne) $ 117 $ 136 $ 125 $ 138 Total cost per tonne processed ($/tonne) $ 199 $ 222 $ 216 $ 232 Cash cost per carat produced ($/carat) $ 35 $ 49 $ 39 $ 46 Total cost per carat produced ($/carat) $ 59 $ 75 $ 62 $ 73(1)
Grade has been adjusted to exclude COR
Diamond Inventory
(in millions of US dollars, except where otherwise noted) July 31, April 30, January 31, 2017 2017 2017Consolidated Diamond Inventory (Ekati mine 100%, Diavik mine 40%)
Carats in inventory available-for-sale (000s) 2,439 3,551 3,674 Estimated market value of inventory available-for-sale $ 170 $ 200 $ 212 Estimated average market value per carat available-for-sale ($/carat) $ 70 $ 56 $ 58 Cost of inventory available-for-sale $ 149 $ 159 $ 182Ekati Diamond Inventory (100% basis)
Carats in inventory available-for-sale (000s) 1,784 2,491 3,046 Estimated market value of inventory available-for-sale $ 124 $ 125 $ 156 Estimated average market value per carat available-for-sale ($/carat) $ 70 $ 50 $ 51 Cost of inventory available-for-sale $ 122 $ 115 $ 143Diavik Diamond Inventory (40% basis)
Carats in inventory available-for-sale (000s) 655 1,060 628 Estimated market value of inventory available-for-sale $ 46 $ 75 $ 56 Estimated average market value per carat available-for-sale ($/carat) $ 70 $ 71 $ 89 Cost of inventory available-for-sale $ 27 $ 44 $ 38Development Projects
Jay
Sable
Misery Deep
Fox Deep
A-21
Exploration Program
Ekati
Diavik
Capital Expenditures (Ekati mine 100% and Diavik mine 40%)
(in millions of US dollars) Three months ended July 31 Six months ended July 31 2017 2016 2017 2016 Ekati sustaining capital expenditures $ 5.1 $ 4.3 $ 21.7 $ 22.9 Ekati production stripping expenditures 22.5 14.0 49.5 17.1 Diavik sustaining capital expenditures 4.9 4.0 9.2 10.0Total sustaining capital expenditures
$ 32.5 $ 22.3 $ 80.4 $ 50.0 Sable expenditures 7.8 16.4 18.8 26.4 Lynx expenditures – 4.4 3.4 18.1 Jay expenditures 5.2 3.1 7.6 26.5 Misery expenditures 0.4 10.3 0.4 30.1 A-21 expenditures 9.4 9.0 18.6 21.0 Other expenditures 4.2 3.0 7.5 8.2Total growth capital expenditures
$ 27.0 $ 46.2 $ 56.3 $ 130.3 Reconciliation to capital cash additions: Capitalized depreciation (2.4 ) (2.9 ) (5.8 ) (5.7 ) Capital accruals (0.4 ) (2.7 ) (2.0 ) –Total cash capital additions
$ 56.7 $ 62.9 $ 128.9 $ 174.6During the second quarter, the Company invested $56.7 million in property, plant and equipment, of which $41.8 million related to the Ekati mine and $14.9 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%.
Updated Fiscal 2018 Guidance
The financial, production and capital expenditure guidance for fiscal 2018 has been adjusted to reflect actual performance in the first half of the fiscal year, and the Company’s current expectations for production, sales, operating costs and capital expenditures for the remainder of the fiscal year.
Fiscal 2018 Financial Guidance
Financial Guidance Revised Original (in millions of US dollars, except per carat amounts) Ekati(1) Diavik(2) Consolidated Ekati(1) Diavik(2) Consolidated Sales(3) 595 - 625(3) 300 - 330 895 - 955 575 - 645(3) 300 - 330 875 - 975 Adjusted EBITDA 300 - 330 185 - 205 465 - 515(4) 315 - 370 180 - 210 475 - 560(4) Depreciation and amortization 225 - 250 85 - 95 310 - 345 225 - 265 85 - 100 310 - 365 Average price per carat sold 60 - 75 90 - 105 70 - 85 60 - 80 90 - 110 70 - 90 (1) Ekati figures are presented on a 100% basis. (2) Diavik figures are presented on a 40% basis. (3) Sales guidance for fiscal 2018 includes production from the Misery Southwest pipe (this is the Operating Case). Misery Southwest pipe is currently an inferred resource. The mine plan for fiscal 2018 foresees approximately 0.2 million carats produced from Misery Southwest, with an estimated market value of approximately $8 million. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the Operating Case will be realized. (4) Consolidated Adjusted EBITDA includes corporate G&A.Sales are expected to be between $895 million and $955 million with strong sales experienced in the first half of the year continuing throughout the remainder of fiscal 2018. Previous guidance for sales for fiscal 2018 was between $875 million and $975 million. Sales are expected to continue to benefit from a return in demand for the commercial and cheaper ranges of goods experienced in the first half of fiscal 2018 as well as ongoing sales of fancy coloured diamonds recovered from the Ekati mine. These positive developments have been offset by a downward revision of the estimated average value per carat for diamonds recovered from Koala underground. This reduction in average value per carat results in a corresponding reduction in estimated sales in the remainder of fiscal 2018. In line with the improvement in demand for smaller and brown goods experienced in the first half of fiscal 2018, the volume of sales in these segments is expected to be higher than originally planned, with a corresponding reduction in the expected average price per carat sold for both Ekati and Diavik mines.
Adjusted EBITDA is expected to be between $465 million and $515 million, compared to the original guidance of between $475 million and $560 million. Guidance for Adjusted EBITDA for the Ekati segment has been reduced by a downward revision of the estimated value per carat for Koala underground, influencing both gross margin and Adjusted EBITDA in that segment. For the Diavik segment, the guidance range for Adjusted EBITDA has been tightened. Guidance ranges reflect continued strong cost controls at both the Ekati and Diavik mines.
Production Guidance
Production Guidance Revised Original (in millions) Ekati(1)Fiscal 2018
Diavik(1)Calendar 2017
Consolidated(2) Ekati(1)Fiscal 2018
Diavik(1)Calendar 2017
Consolidated(2) Tonnes mined 28 - 30 2.1 - 2.3 27 - 30 2.1 - 2.3 Tonnes processed 3.7 - 4.0 2.0 - 2.2 4.5 - 4.9 3.7 - 4.0 2.0 - 2.2 4.5 - 4.9 Carats produced (Base Case)7.4 - 7.9
5.0 - 5.6 Carats produced(3) (Operating Case) 7.5 - 8.0 7.2 - 7.6 10.4 - 11.0 6.3 - 7.0 7.1 - 7.6 9.1 - 10.0 (1) Ekati and Diavik figures are presented on a 100% basis. (2) Consolidated production includes 100% of Ekati production in fiscal 2018 and 40% of Diavik production in calendar 2017. (3) Reflects the Operating Case at Ekati mine; this includes the Misery Southwest pipe which is currently an inferred mineral resource. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the Operating Case will be realized.At the Ekati mine in fiscal 2018, it is expected that between 28 and 30 million total tonnes will be mined, and between 7.5 and 8.0 million carats will be produced from 3.7 to 4.0 million tonnes processed, on a 100% basis. Construction at the Sable pipe was completed significantly ahead of schedule and waste stripping activities have been prioritized at that pipe in the second half of fiscal 2018 with a corresponding reduction in waste stripping activities at the Lynx and Pigeon pipes. Based on the results of a positive PFS and following a decision in June 2017 to proceed with the development of an underground operation below the Misery Main open pit, the processing plan has been revised for the remainder of fiscal 2018 and it is expected that more high-value Misery Main and Koala ore will be processed in the second half of the fiscal year, displacing lower-value Pigeon and Misery Southwest material. As Misery Main is a higher-grade ore source, this has resulted in an increase in expected carats produced in fiscal 2018. Processing of Lynx ore commenced in August 2017 and the recovery of diamonds from the Lynx pipe is expected to be completed in Q3 fiscal 2018.
At the Diavik mine, underground mining will continue at A-418, A-154 South and A-154 North pipes. In calendar 2017, it is expected that between 2.1 and 2.3 million tonnes will be mined, and between 7.2 and 7.6 million carats will be produced from 2.0 to 2.2 million tonnes processed, on a 100% basis.
Unit cost production guidance for each of the Ekati and Diavik mines is indicated in the table below. Per carat metrics in any particular quarter may vary from the annual guidance due to variations in the ore blend.
Unit Cost Guidance Revised Original (in US dollars) Ekati Diavik Consolidated Ekati Diavik Consolidated Cash cost per tonne processed ($/tonne) 60 - 70 120 - 130 70 - 80 60 - 70 120 - 130 70 - 80 Total cost per tonne processed ($/tonne) 120 - 135 220 - 235 140 - 155 120 - 135 220 - 235 140 - 155 Cash cost per carat produced ($/carat) 30 - 35 35 - 40 35 - 40 35 - 40 35 - 40 35 - 40 Total cost per carat produced ($/carat) 60 - 70 60 - 70 60 - 70 65 - 75 60 - 70 65 - 75Unit cost production guidance on a tonnes processed basis remains unchanged for fiscal 2018, reflecting strong cost control at both the Ekati and Diavik mines. Cash cost per tonne processed at the Ekati mine has been near the upper end of the range in the first half of fiscal 2018 as a result of unplanned maintenance, and to a lesser extent, seasonal weather-related material handling challenges experienced in the first quarter of fiscal 2018. However, mitigation of some of this shortfall occurred in the second quarter, and is expected to continue in the second half of fiscal 2018. Unit cost production guidance on a carat produced basis remains unchanged for the Diavik mine and has been reduced for the Ekati mine, reflecting the expected increase in carats produced as a result of changes in the ore blend in the remainder of fiscal 2018.
Capital Expenditure Guidance
Capital Expenditure Guidance(1) Revised Original (in millions of US dollars) Ekati(2)Fiscal 2018
Diavik(3)Calendar 2017
Consolidated(4) Ekati(2)Fiscal 2018
Diavik(3)Calendar 2017
Consolidated(4) Growth capital 90 - 100 35 - 40 125 - 140 90 - 110 25 - 30 115 - 140 Sustaining capital(5), (6) 120 - 130 13 - 15 140 - 150 140 - 170 13 - 15 160 - 190Total capital expenditures(5),(6)
210 - 230 48 - 55 265 - 290 230 - 280 38 - 45 275 - 330 (1) For additional information on capital expenditures at the Ekati and Diavik mines, refer to the technical report entitled “Ekati Diamond Mine, Northwest Territories, Canada, NI 43-101 Technical Report” with an effective date of July 31, 2016, and the technical report for Diavik entitled “Diavik Diamond Mine, Northwest Territories, Canada, NI 43-101 Technical Report” with an effective date of January 31, 2017. (2) Ekati figures are presented on a 100% basis. (3) Diavik figures are presented on a 40% basis. (4) Consolidated figures include Ekati on a 100% basis in fiscal 2018 and Diavik on a 40% basis in calendar 2017. (5) Sustaining capital expenditures include capitalized production stripping at Ekati and underground mine development at Diavik. (6) Consolidated sustaining capital includes corporate capital expenditures.The capital expenditures at the Ekati mine (100% basis) for fiscal 2018 are expected to be between approximately $210 million and $230 million compared to the original guidance of between $230 million and $280 million. The expected decrease from the original guidance is due to lower sustaining capital expenditures as a result of the deferral of waste stripping activities at the Lynx and Pigeon open pits, and to a lesser extent, the deferral of certain projects. This decrease was partially offset by an increase in growth capital due to the acceleration of initial waste stripping at the Sable project and the addition of the Misery underground project, approved in June 2017.
The capital expenditures at the Diavik mine (40% basis) for calendar 2017 are expected to be between approximately $48 million and $55 million compared to the original guidance of between $38 million and $45 million. Expenditure on the A-21 project remains on budget, but due to the accelerated project schedule, additional expenditure is expected to be incurred in calendar 2017, with a corresponding reduction in future periods.
As a result of the revisions to planned capital expenditures at the Ekati and Diavik mines in fiscal 2018, the mid-point of the guidance range for consolidated capital expenditures is approximately $278 million, a decrease of 8% from the mid-point of the original guidance range.
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
July 31,
January 31,
(unaudited) (expressed in thousands of US dollars)
2017
2017
ASSETS Current assets Cash and cash equivalents (note 4) $ 199,393 $ 136,168 Accounts receivable 14,617 13,946 Inventory and supplies (note 5) 385,637 412,227 Other current assets 21,776 29,765 Income taxes receivable 22,189 17,720 643,612 609,826 Property, plant and equipment 1,295,413 1,295,584 Restricted cash (note 4) – 65,742 Other non-current assets 20,785 21,362 Deferred income tax assets 14,481 11,362 Total assets $ 1,974,291 $ 2,003,876 LIABILITIES AND EQUITY Current liabilities Trade and other payables $ 106,902 $ 108,866 Employee benefit plans 2,939 1,192 Income taxes payable 44,492 54,710 Current portion of loans and borrowings – 10,556 154,333 175,324 Deferred income tax liabilities 147,742 155,380 Employee benefit plans 20,089 15,911 Provisions 334,010 328,356 Total liabilities 656,174 674,971 Equity Share capital (note 11) 479,973 478,526 Contributed surplus 25,535 31,667 Retained earnings 753,023 718,298 Accumulated other comprehensive loss (9,628 ) (9,622 ) Total shareholders’ equity 1,248,903 1,218,869 Non-controlling interest 69,214 110,036 Total equity 1,318,117 1,328,905 Total liabilities and equity $ 1,974,291 $ 2,003,876The notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Income (Loss)
Three months Three months Six months Six months (unaudited) (expressed in thousands of ended ended ended July ended July US dollars) July 31, 2017 July 31, 2016 31, 2017 31, 2016 Sales $ 239,782 $ 159,970 $ 450,760 $ 338,229 Cost of sales 202,123 159,108 382,328 356,185 Gross margin 37,659 862 68,432 (17,956 ) Selling, general and administrative expenses 7,355 9,175 15,635 17,211 Mine standby costs – 22,028 – 22,028 Restructuring costs (note 12) 1,476 – 3,751 – Transaction costs (note 1) 11,167 – 11,167 – Operating profit 17,661 (30,341 ) 37,879 (57,195 ) Finance expenses (3,476 ) (2,476 ) (7,107 ) (4,964 ) Exploration costs (1,536 ) (1,447 ) (2,272 ) (5,028 ) Finance and other income 1,328 806 2,317 1,178 Foreign exchange (loss) gain 1,935 (4,446 ) (3,630 ) (7,804 ) Profit (loss) before income taxes 15,912 (37,904 ) 27,187 (73,813 ) Current income tax expense 7,145 10,139 28,284 16,814 Deferred income tax recovery (22,309 ) (10,094 ) (24,335 ) (47,380 ) Net income (loss) $ 31,076 $ (37,949 ) $ 23,238 $ (43,247 ) Net income (loss) attributable to Shareholders $ 31,862 $ (32,931 ) $ 23,952 $ (33,970 ) Non-controlling interest (786 ) (5,018 ) (714 ) (9,277 ) Earnings (loss) per share Basic $ 0.39 $ (0.39 ) $ 0.29 $ (0.40 ) Diluted 0.39 (0.39 ) 0.29 (0.40 ) Basic weighted average number of shares outstanding 81,272,085 85,329,701 81,212,288 85,323,314The notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statement of Cash Flows
Three months Three months Six months Six months (unaudited) (expressed in thousands of US ended ended ended July ended dollars) July 31, 2017 July 31, 2016 31, 2017 July 31, 2016 Cash provided by (used in) OPERATINGNet income (loss) $ 31,076 $ (37,949 ) $ 23,238 $ (43,247 ) Depreciation and amortization 85,087 57,176 160,896 115,620 Deferred income tax recovery (22,309 ) (10,094 ) (24,335 ) (47,380 ) Current income tax expense 7,145 10,139 28,284 16,814 Finance expenses 3,476 2,476 7,107 4,964 Stock-based compensation 363 360 (43 ) 1,177 Other non-cash items 4,682 (568 ) (7,088 ) 2,962 Deferred tax impact of increase in participating interest in Buffer Zone (12,343 ) –
(15,053
)
– Unrealized foreign exchange gain (loss) 12,165 (469 ) 10,027 8,867 Gain on disposition of assets – 259 – 494 Impairment losses on inventory – 6,414 – 26,017 Interest paid (121 ) (653 ) (198 ) (747 ) Income and mining taxes paid (45,285 ) (3,170 ) (45,384 ) (50,455 ) Change in non-cash operating working capital, excluding taxes and finance expenses 35,571 9,951 18,731 16,746 Net cash from operating activities 99,507 33,872 156,182 51,832 FINANCING Repayment of interest-bearing loans and borrowings (10,556 ) (10,757 ) (10,556 ) (10,944 ) Distributions to and contributions from minority partners, net2,314
1,096 2,314 (2,887 ) Issue of common shares, net of issue 14,277 – 14,539 127 Share repurchase (6,097 ) – (19,181 ) – Dividends paid (16,138 ) (17,066 ) (16,138 ) (17,066 ) Cash used in financing activities (16,200 ) (26,727 ) (29,022 ) (30,770 ) INVESTING Decrease in restricted cash 51,146 2,392 65,742 2,392 Net proceeds from preproduction sales – 8,129 – 11,870 Purchase of property, plant and equipment (56,705 ) (62,896 ) (128,934 ) (174,552 ) Other non-current assets 347 49 577 1,485 Reclamation expenditures (270 ) – (270 ) – Cash used in investing activities (5,482 ) (52,326 ) (62,885 ) (158,805 ) Foreign exchange effect on cash balances (9,600 ) (872 ) (1,050 ) (1,894 ) Increase in cash and cash equivalents 68,225 (46,053 ) 63,225 (139,637 ) Cash and cash equivalents, beginning of period 131,168 226,454 136,168 320,038 Cash and cash equivalents, end of period $ 199,393 $ 180,401 $ 199,393 $ 180,401 Change in non-cash operating working capital, excluding taxes and finance expenses Accounts receivable 5,779 1,395 2,616 930 Inventory and supplies 55,725 44,186 12,009 31,946 Other current assets 10,627 10,444 7,987 1,668 Trade and other payables (37,525 ) (46,007 ) (5,597 ) (15,792 ) Employee benefit plans 965 (67 ) 1,716 (2,006 ) $ 35,571 $ 9,951 $ 18,731 $ 16,746The notes are an integral part of these condensed consolidated interim financial statements.
Non-IFRS Measures
This 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 and six months ended July 31, 2017, for further details, including a reconciliation of each such measure to its most directly comparable measure calculated in accordance with IFRS.
Qualified Person
The mine plan for the Ekati Diamond Mine for fiscal 2018 was prepared and verified by Dominion, operator of the Ekati mine, under the supervision of Peter Ravenscroft, FAusIMM, of Burgundy Mining Advisors Ltd., an independent mining consultant, and a Qualified Person within the meaning of National Instrument 43-101 of the Canadian Securities Administrators, and the mine plan for the Diavik Mine for calendar 2017 was prepared and verified by DDMI, operator of the Diavik Mine, under the supervision of Calvin Yip, P.Eng., Principal Advisor, Strategic Planning of DDMI, who is a Qualified Person within the meaning of National Instrument 43-101 of the Canadian Securities Administrators. The other scientific and technical information contained in this press release has been prepared and verified by Dominion, operator of the Ekati mine, under the supervision of Chantal Lavoie, P. Eng., Chief Operating Officer of Dominion, and President of Dominion Diamond Ekati Corporation (DDEC), and a Qualified Person within the meaning of National Instrument 43-101 of the Canadian Securities Administrators.
Forward-Looking Information
Information included herein, including information about expected sales, Adjusted EBITDA, diamond pricing and estimated production from, and exploration and development activities at, the Ekati mine and the Diavik mine, and expectations concerning the diamond industry, strategic review process and the Arrangement 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 Corporation
Dominion 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/20170906006796/en/
Investors:Dominion Diamond CorporationJacqueline Allison, 416-205-4371Vice-President, Investor Relationsjacqueline.allison@ddcorp.caorCanadian Media:DFH Public AffairsIan Hamilton, 416-206-0118 x222orUS Media:Gagnier CommunicationsDan Gagnier, 646-569-5897
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