Safe from creditors | End of countdown for Stornoway Diamonds

The countdown is drawing to a close at the Renard diamond mine, which has already lost taxpayers hundreds of millions. It only has two months left to find a way to relaunch its activities, suspended since October 27.

For the second time in four years, Diamants Stornoway turned to Companies’ Creditors Arrangement Act (LACC), which resulted in 450 layoffs – approximately 80% of the company’s workforce. Potential buyers have come forward since Deloitte, responsible for judicial restructuring, has been looking for a buyer for this diamond complex.

There seem to be some interested parties, according to the firm’s most recent report, dated January 22, which does not specify how many suitors have raised their hands. However, only non-binding letters of intent have been received. The transaction scenario is “realistic” and “reasonable”, but there are no guarantees.

“If the (investment solicitation and sale process) is unsuccessful and ends before March 29, the Monitor will assist the Debtors in implementing an orderly liquidation of their assets and operations. »

Located in the Eeyou Istchee territory, in Nord-du-Québec, the Renard mine restarted in 2020. Osisko, Investissement Québec (IQ) – the financial arm of the Quebec state –, the Caisse de dépôt et placement du Québec ( CDPQ) and Triple Flag are the owners of Stornoway. The Legault government has already made it known that it has no intention of coming to the rescue of the mining company.

At the time of taking shelter from its creditors, its debts amounted to approximately 275 million. IQ (120 million), Osisko (59 million) and CDPQ (25 million) are the secured creditors.

Dozens of calls

No less than 68 potential buyers have been contacted since last fall by the controller. Ten of them were given access to inside information about the company after signing a nondisclosure agreement, and an unspecified number of “non-binding letters of intent” were filed. The next step aims to determine who, among the suitors, can be considered a serious buyer.

“From discussions during the first phase of the process, it was apparent to the monitor that the Stornoway mine was well known in the industry,” Deloitte wrote.

Public losses from the first Stornoway debacle

Investissement Québec: 110 million

Caisse de dépôt et placement du Québec: 42 million

FTQ Solidarity Fund: 50 million

Stornoway blames its financial debacle on the plummeting price of jewelry diamonds. It has declined in response to competition from synthetic stones, popular with millennials of engagement age. The global context prompted India – a major global polishing center – to impose a two-month moratorium on rough diamond imports. This forced break ended on December 15.

According to documents filed by the Renard mine operator with the Superior Court of Quebec, the price of a jewelry diamond was close to US$120 per carat last March. Six months later, it had plunged to around US$81.50.

The market has recovered since then, with the price hovering around US$110. This seems to bode well for Stornoway which, in a recovery scenario, anticipates an average price of US$105 in 2024. It remains to be seen whether the trend will continue.

IQ, the CDPQ and the Fonds de solidarité FTQ swallowed up several tens of millions in the first Stornoway shipwreck. Added to this is the public funding of around 400 million aimed at building the road section connecting the Renard mining complex to Route 167.

Learn more

  • 2016
    Year of inauguration of the Renard diamond mine

    source: stornoway diamonds


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