Stornoway, Soquem, aim for 2011 production decision at Renard

Stornoway Diamond (SWY-T) and Soquem have started work on a feasibility study at their Renard joint venture in Quebec, while at the same time, attempting to expand resources at the diamond project.

The equal partners announced in July that a feasibility study, building on a preliminary assessment of the project released in March, was a go. Stornoway and Soquem, a Quebec government agency, hope to make a production decision by the end of 2011 and if positive, begin construction in 2012 and production by the end of 2013.

The preliminary assessment estimated a potential mine life of 25 years based on a 5,000-tonne-per-day operation. It suggested the project has an after-tax net present value of $538 million (at a discount rate of 8%) and an after-tax internal rate of return of 20.5%.

The study was based on an indicated resource of 26.5 million tonnes grading 87 carats per hundred tonnes (cpht) for 23 million carats and an inferred resource of 17.8 million tonnes at 75 cpht for 13.3 million carats in the Renard 2, 3, 4 and 9 kimberlite pipes. All the pipes at Renard are open at depth, and Stornoway believes there is potential to significantly expand them.

While the partners are bypassing a prefeasibility study, they say much of the work that went into the preliminary assessment was high-level enough to make that decision.

As work goes ahead on a feasibility, Stornoway and Soquem have also been conducting drilling to expand resources at the project. The fall drill program saw six deep holes drilled, totalling 3,020 metres, and succeeded in expanding Renard 3, Renard 4 and Renard 65.

A continuation of last winter’s stepout drill program, the drilling is expected to add resources at depth at Renard 3 and Renard 4, and delineate an initial inferred resource at Renard 65. The company noted in a release that deep delineation drilling in 2009 tripled resources at the project.

Although the Renard 65 pipe returned a 4-carat, gem quality diamond in core in 2003, subsequent testing revealed lower diamond content than other kimberlites. The pipe — the largest of the Renard kimberlites at 1.7 hectares at surface — is not part of the current resource and wasn’t included in the prelimary assessment.

Drilling at the kimberlite confirmed it extends to 513 metres depth, and is expected to expand it to the east and south. In July, Stornoway reworked the diamond content models for Renard 65 using existing data. That exercise resulted in a new modelled diamond content of 26-38 cpht. While it wouldn’t be included in the initial mine plan, the partners are assessing Renard 65 for potential future development.

The JV also completed a hole started during the summer at Renard 1, totalling 537 metres. Although previous testing indicated low diamond contents of 0-16 cpht at Renard 1, Stornoway believes much of the material tested was non-kimberlitic halo material, and that as a result, the diamond content may have been understated. Detailed geological logging of the hole and microdiamond analysis was not complete at presstime.

“The results of the fall drill program have confirmed that the Renard kimberlite pipes are larger at depth than previously assumed,” said Stornoway president and CEO Matt Manson in a release in October. “As well as the expected boost to the project’s inferred mineral resources, the drilling serves to bring out the extensive resource upside below the level of the existing conceptual mine plan at Renard, and confirms the potential for a considerable mine life at the project.”

In a press release, Stornoway acknowledged its goal of production by late 2013 is aggressive. However, it believes the tight schedule can be met, even if there are delays on the extension of Route 167. The 268-km extension, which would link Renard to the provincial highway system, is in the midst of a feasibility assessment and permitting, and Stornoway says if the road is not ready on time, a seasonal access road can be built.

The partners are also studying the feasibility of building a power line to the project.

In other news, in September, Stornoway announced a renewed focus on grassroots exploration after a suspension of such work in 2008. Grassroots activities have begun at the LG-4 Diamants-Consorem project in Quebec, a JV with Virginia Mines (VGQ-T) (the operator), Soquem and Aurizon Mines (ARZ-T). Each party has a 25% interest.

The company has multiple projects in the Far North and Prairies, including several joint ventures, as well as the wholly owned Timiskaming project on the northern Ontario-Quebec border.

In October, Stornoway shares traded at 60¢ in a 52-week range of 23-80¢. The company has 297.5 million shares outstanding.