Stornoway Diamond Corp. is racing to stave off insolvency as it deals with a decline in gem prices that has prevented the Canadian miner from generating positive free cash flow this year.
Longueuil, Que.-based Stornoway said Tuesday it is in talks with backers to secure its long-term financial viability. At the same time, the company launched a major cost-cutting effort and strategic review, which could mean putting itself up for sale.
“We have a cash crunch so that’s why we need to look at our options,” Stornoway chief executive Patrick Godin said in an interview with The Globe and Mail, adding that although diamond pricing is soft at the moment, he remains confident it will recover as global supply decreases over the next several years. “Given the quality of the asset that we have, we just need to resist during the tough times to be able to take the wave.”
Mr. Godin, who took over from Matt Manson this past January, is trying to stabilize the company and get operations at its Renard mine running at a steady level after a couple of early setbacks. Stornoway built Renard, its main asset, in Quebec’s Otish Mountains, a range of hills north of Lac Mistassini, in the summer of 2016 with a $946-million financing package.
Renard’s construction came in under budget and five months ahead of schedule, igniting hopes that it would lead to other resource development in the province’s vast northern territory.
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