The Renard diamond mine continues to attract interest despite its financial setbacks. Sheltered from its creditors for the second time in four years, Diamants Stornoway also intends to knock on around sixty doors in the hope of relaunching its activities.
In the red, this diamond complex – which has already caused taxpayers to lose hundreds of millions – has been shut down since October 27, leading to the dismissal of some 450 people, or around 80% of its workforce. Despite the difficult market conditions for jewelry diamonds, the company already appears to be attracting interest.
“Stornoway […] has received several inquiries regarding the investment solicitation and sale process from parties familiar with the proceedings under the Companies’ Creditors Arrangement Act (CCAA),” writes the controller Deloitte, responsible for the restructuring, in his most recent report.
Located in the Eeyou Istchee territory, in Nord-du-Québec, the mining complex restarted its activities in 2020. Stornoway is owned by Osisko, Investissement Québec (IQ), the Caisse de dépôt et placement du Québec (CDPQ) and Triple Flag . The Legault government has already made it known that it will not put any money back into the adventure. Stornoway’s receivables amount to approximately 275 million. The largest secured creditors are IQ (120 million), Osisko (59 million) and CDPQ (25 million).
The first phase of the process to find a potential buyer is expected to last until January 19, according to Deloitte.
“Stornoway prepared marketing materials, including […] a list of approximately 60 potential international strategic and financial buyers,” the controller wrote.
According to the overview of information provided to potential investors, the relaunch of activities at the Renard mine could occur as early as next May. At the time of writing, La Presse had not been able to contact the president and CEO of Stornoway, Patrick Sévigny, as well as the vice-president of human resources, Denis Desaulniers.
Professor in the Department of Earth and Atmospheric Sciences at UQAM, Michel Jébrak is not surprised to see different players interested in the Renard mine. The expert warns, however, that buyers will have to be patient.
Diamond prices have fallen in response to competition from synthetic stones, popular with millennials of engagement age. The slump is such that India, a major global polishing center, has imposed a moratorium on rough diamond imports until December 15 in the hope of clearing its stock.
This is one of the factors that pushed Stornoway to the brink.
The price of a jewelry diamond was close to US$120 per carat in March. Last September, it plunged to around US$81.50, according to documents filed by the company in Quebec Superior Court. By the end of the financial year, the average price is expected to be US$97.3 – a far cry from the US$112.50 Stornoway predicted.
The market will therefore have to recover if the company wants to emerge from protection under the CCAA. In a recovery scenario, Stornoway anticipates an average price of US$105 in 2024.
IQ, the CDPQ and the Fonds de solidarité FTQ had already lost tens of millions in the first Stornoway shipwreck. These amounts do not take into account public funding of approximately 400 million aimed at building the road section connecting the mining complex to Route 167.
