Fox Mine | The adventure is coming to an end

After less than a decade and 700 million in public support, everything indicates that the diamond adventure is coming to an end in Quebec. The equipment from the Renard mine has found a buyer, but this symbol of the Plan Nord, which will once again cause taxpayers to lose millions, will probably remain at a standstill for a long time to come.

Deloitte, responsible for the legal restructuring of Diamants Stornoway, is working to finalize the final details of a transaction with a buyer as part of the procedures taking place under the Companies’ Creditors Arrangement Act (LACC) since last fall.

The documents filed with the Superior Court of Quebec do not reveal the identity of the buyer nor the details of the financial arrangement or the price paid. According to our information, the objective of the transaction would essentially consist of getting its hands on the equipment of the mining complex, such as the concentrator, the crusher and the conveyors. A relaunch of the mine’s activities – which started in 2016 – would not feature in the plans.

“The debtors [Stornoway]the offeror and the controller have worked on the preparation of the final documentation in order to submit the envisaged agreement for court approval,” writes Deloitte, in a motion presented on March 19.

It was not possible to speak with the president and CEO of Stornoway, Patrick Sévigny. Deloitte declined to comment on the planned transaction. Since the Superior Court granted the controller’s request, Stornoway will remain sheltered from its creditors until Thursday, which means that the transaction should be presented to the court by then.

Eventful adventure

The operator of the Renard diamond complex took shelter from its creditors on October 27, thereby sending 425 employees – or 80% of its workforce – into unemployment. It was the second time in four years that he found himself in this position. The mining company has been unable to resist the rise in popularity of synthetic stones among millennials of marriageable age.

“It’s an average deposit with an average grade,” says Éric Lemieux, mining analyst at EBL Consultants. Everything ensured that the quality of the diamonds was average. When the price [de la ressource] decreases, it’s difficult to get your head above water. »

Located on the Eeyou Istchee territory, in Northern Quebec, the Renard mine has constantly been confronted with financial challenges. It restarted in 2020 after a first judicial restructuring under the CCAA. Its shareholders were Osisko, Investissement Québec (IQ) – the financial arm of the Quebec state –, the Caisse de dépôt et placement du Québec (CDPQ) and Triple Flag. The Legault government had already made it known last fall that it had no intention of coming to the rescue of the mining company.

At the time of the most recent debacle, the mining company’s debts amounted to 275 million. IQ (120 million), Osisko (59 million) and CDPQ (25 million) were the secured creditors. In principle, they should all leave significant sums on the table. This does not take into account the public funding of around 400 million aimed at building the road section connecting the mine to Route 167.

Good equipment

Mr. Lemieux believes that a patient buyer could have taken the time to wait for the price of diamonds to rise before making a new attempt to revive the Renard mine. Since the company’s equipment is barely ten years old, it has an attractive value, the analyst believes.

“We have seen this in the past, mining companies which were sold for the equipment,” says the expert. They are transported elsewhere to another complex. The Renard mine is not at the end of its life, but it is not in its infancy either. Exploitation will cost more and more because we have to go deeper. »

According to the overview of documents prepared by Deloitte for potential buyers, the remaining life of the Renard mine is at least 12 years.

Stornoway blamed its most recent fall on the plummeting price of jewelry diamonds. This had collapsed in reaction to competition from synthetic stones. This global context had even prompted India – a major global polishing center – to impose a temporary moratorium on imports of rough diamonds.

In March 2023, the price of a jewelry diamond was close to US$120 per carat. Six months later, it had plunged to around US$81.50. Prices have since recovered. On Wednesday, the price per carat was trading around US$108. Mr. Lemieux believes that prices above US$120 per carat would allow Stornoway to “keep its head above water”.

Stornoway’s financial situation had rapidly deteriorated after reaping profits of 42 million in 2022. Its losses reached 13 million last year when it turned to the CCAA.