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Stornoway Diamond Inc. is filing for bankruptcy protection for the second time in four years as the miner struggles to deal with volatile pricing on global markets.
The privately-held company said Friday it is immediately suspending operations at its Renard site in Northern Quebec while it plots a path forward. About 75 employees will work on maintaining equipment and other assets for a return to operations, the company said.
Renard is Quebec’s first and only diamond mine, opened in 2017.
“The growing uncertainty of the diamond price in the short and medium term, coupled with the significant and sudden drop in the price of the resource on the world market, have had a major impact on the Company’s long-term financial situation,” Stornoway said in a statement.
“This was in part due to the halt in the import of rough diamonds to India and by the global geopolitical climate.”
India is the world’s biggest cutter and polisher of diamonds. Stornoway has been hit hard in the past when the market has been flooded by smaller and lower-quality stones because smaller diamonds account for a significant portion of its production by weight.
The company said it has launched a process to file for bankruptcy protection under Canada’s Companies’ Creditors Arrangement Act in a bid to restructure and turn around its finances. It is seeking investment and sale proposals.
Stornoway is owned by Osisko Gold Royalties, Investissement Québec, pension fund manager Caisse de dépôt et placement du Québec and TF R&S Canada Ltd.
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 C$946-million financing package.
The 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. But the project suffered some early snags, notably in the fall of 2017, when Renard diamonds were found to be breaking in processing at a higher frequency than the company expected.
Stornoway fixed the breakage, but that and other production and pricing problems forced the company to go to its lenders and key stakeholders in 2018 for additional funds and loan flexibility because it could not generate positive free cash flow. The year after, Osisko and other creditors took control of Stornoway after it filed for bankruptcy protection.
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