Stornoway Diamond Corp. (OTCPK:SWYDF) Q1 2018 Earnings Conference Call May 16, 2018 11:00 AM ET
Jodi Hackett – Communications Manager
Matt Manson – President & CEO
Patrick Godin – COO
Orin Baranowsky – CFO
Scott McDonald – Scotia Bank
Edward Sterck – BMO
Good day, ladies and gentlemen. And welcome to Stornoway Diamond Corporation First Quarter 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions].
I would now like to introduce your host for today’s conference Ms. Jodi Hackett, Manager of Communications. Ma’am please go ahead.
Thank you, Michelle. Good morning, everyone, and thank you for joining us on the call. After market close yesterday, we released our first quarter 2018 results, which are available on our website or on SEDAR. Here this morning to discuss our results we have; Matt Manson, President and CEO; Patrick Godin, COO; and Orin Baranowsky, CFO.
There is a presentation on our website that you are able to access at www.stornowaydiamonds.com, a supplement our press release and this call. Management will provide an overview of the first quarter 2018 results, followed by commentary on the outlook for the business for the remainder of 2018. We will then open the floor for questions. Please note some number mentioned during the call maybe rounded for ease of listening. However, the full and complete numbers will be listed in the presentation and MD&A.
Before we begin, please note that certain statements may be made on this call by management that may contain forward-looking information. I refer listeners to read the cautionary statements regarding forward-looking information in our press releases, on our website and in our presentation.
I will now turn the call over to Matt Manson, Stornoway’s President and CEO. Matt?
Thanks, Jodi, and thanks everyone who was able to join us yesterday Montreal for AGM and those who are able to follow us with the webcast online. It was a well attended events as always in Montreal, and I think it was a good opportunity to describe the business to everybody.
And talking about our first quarter of 2018, let me first report that we incurred four loss time incidents this quarter related to slips and falls on the store niches site, which ended a period of more than 12 consecutive months of no loss time injuries or Renard.
So two of these incidents were with Stornoway employees and two were with contractors. None of them resulted in serious injury. But we pride ourselves in a safe working environments and four LTI is for too many. There were no incidents of environmental non-compliance in the quarter.
The first quarter results that we released last night and are presenting here today. Reps in the financial and operating results for the company during a period of transition as we move it from an open pit operations to sourcing, the majority of our order from underground at Renard.
Mining in the main Renard 2 and Renard 3 pits concluded by April and the Underground mining continues to ramp up to full production rates to the end of the second quarter. I think we’ll dominate the company’s production profile for the next 10 years and beyond.
The ramp up of the underground maintenance is proceeding well and we are happy with the progression of mining. We were also happy with the early performance of our ore waste sorting circuit.
A Pat with Orin will be talking about both of these in more detail shortly.
As we go through this transition, carat recovery has been impacted by the processing of lower grade ore based on its availability of the database and the ability of the ore at the base of the open pits in the ore stockpiles and in the first underground stops.
Because of this, and I think prudently, we are reducing our guidance for carats recovered and carat sold during this year. Nevertheless, the slower carat production is being tampered by continuing strong rough diamond market and marked improvements in the quality and the size distribution mix of our production, which has given us our best quarter to-date in terms of achieved diamond pricing.
So I’m now going to pass this off to Orin, who will take you through the detailed financial and operating results. Starting with slide number six on your online bank of materials.
Thanks, Matt. Before we get into the first quarter results, I just like to highlight that in the quarter the company adopted IFRS-9 financial instruments and IFRS-15 revenue from contracts with customers replacing IAS-39 and superseding IAS-11 and 18 respectively.
IFRS-9 was applied retrospectively and IFRS-15 was applied using the modified retrospective methods and we outline the impact of IFRS-15 on our Q1 results on slide six for you. IFRS-9 had a minimal impact on the quarter.
Slide seven illustrates our five operating quarters to-date for tons processed, carats sold, a gross proceeds from sale on average – cheap diamond prices. The standout from the quarter, as we previously reported is the lower than expected grade and lower than expected carat recovery as we process a lower grade ore.
We pre-released our first quarter operating and sales results on April 11, and as reported then our mining productivity in the R2, R3 open pits during the quarter was hampered by poor weather conditions and equipment availability which resulted in several thousands of tons of high grade ore being left in the bottom of the pit for safety reasons.
We will eventually recover this ore through the underground mine. However, in the absence of this material and as we ramp up or underground mining, we have in processing more of our lower grade stockpiled ore than was planned.
The initial underground ore is also relatively low grade as the first mining panels developed at the north end of the R2 ore body at the 290 millimeter — 290 meter level were marginal, highly dilute materials located.
Net impact of this is a lower than expected grading carat recovery in the first quarter. And this trend is expected to continue through the second quarter as we complete our mining transition and move to higher grade stocks in the underground mine.
In terms of sales during the quarter, we completed three tender sales of 399,000 carats, for gross proceeds of CAD56.6 million, at average price of $112 per carat. This is a record quarter for sales for us and reflects a strong market and improving product mix.
In addition, we sold 42,663 carats of incidental small diamonds, recovered in excess of the — of expectations from the mineral resource that recovered and sold an average price of $18.50.
Turning onto slide eight, cash cost per ton came in as expected at slightly above $50 per ton. Due to lower tons processed and cash costs per carat at $99 per carat we’re impacted by the lower carat recovery. Capital cost were on schedule at 31 million, mostly related to the development of the underground mine and ore sorting plant.
Moving to slide nine for our financial results, we’re showing in the table for Q1 2018, the proceeds from two tender sales and the sale of incidentals that first quarter revenues for 38.6 million and this excludes the impact of a IFRS-15. And the proceeds from the third tender sale will be recognized as revenue in the second quarter, owing to the timing of the receipt of the funds.
This timing issue gave us a first quarter EBITDA of 7.4, which was the margin in 19% lower than we achieved in 2017, but still reflecting a good operating margin for the business. The lower EBITDA resulted in a net loss in the quarter of $11 million.
At the end of the quarter, we had 51.6 million of cash and cash equivalents. Our deposition was 306.9 million and we had total liquidity of 71.9 million.
I’ll now pass this back to Matt to discuss the progress over diamond sales.
Thanks Orin. As you know we sell our diamonds, better I will refer you to slide 10 on your, on line deck. We sell our diamonds by tender through bonus cuisine in Antwerp. And on slide 10 we’re showing you the key bidding KPIs that we have seen since our sales began.
We’re also showing the trends in pricing express in real terms with the changes in our mix removed. The first quarter of 2018 saw record attendance of the tenders and record pricing. In real terms, we were up 20%, which you know first sale in November 2016, and on our last sale of the quarter in March of 2018.
This is a much stronger performance in the general market during this time and reflects the strong specific demand for the Renard diamond production. We have now completed one sale in second quarter and I can confirm this upward trend and real pricing is continuing.
On slide 11, we are showing actual cheap pricing for each sale, which are dates that we presented at our Montreal AGM yesterday. We are guiding this year the pricing on a segmented basis that is our plus seven, which is larger than three millimeter and R minus seven smaller than three millimeter at product category of separately.
This is because we expect our minus seven production to be volatile and we don’t want this volatility to obscure improvements we are working to achieve and in plus seven pricing. So you can see from slide 11 that we achieved consistently higher prices for each segment during the course of the quarter. In fact, pricing for the plus seven production has been consistently rising since late summer 2017.
We are not achieving well within or above our 2018 guidance in both segments of our business. Much of this improvement is due to a better quality and size mix in our production, which we can ascribe to, to progressively lower breakage in the process plant and the introduction of Renard 65 ore for the first time in our production mix.
Our third sale of the quarter at $123 per carat overall was certainly by a record stone to date, the 37 carat recovered from the 65 kimberlites we sold for 1.3 million, but even without that stone our third state of the year would have been our best result to-date.
On slide 12, we’re actually showing you that stone, it was a Type II-a, D colour flawless, non fluorescent flattish stolen, that will make a beautiful specialized cut. The surface frosting and exhibit this characteristic of the Renard 65 ore body that’s why we know it came from there, even though we’re blending our ore.
And alongside, we were showing a 189 carat. This one is less beautiful and not one that would set any sales record, but it’s still impressive as the largest gem quality diamond ever reported recovered in Canada. The photo you are seeing there is before cleaning and the stone was broken in several places. It would have originated from the Renard 2 or the Renard 3 kimberlite.
To recover Canada’s largest ever reports of gem diamonds after 18 months of production and an industry that has no 20 years old in Canada is an indication of the potential for large stone recovery, Renard. We look forward to the recovery of a stone with the size attributes of the diamonds on the right there, 189 carater and the quality attributes of the 37 carater.
And I’m going to pass this over to Pat to take you through the main operations.
Thanks Matt. Slide 14 is an image we showed at our AGM yesterday and it communicates well the stages of our carat mining. We complete mining in R2 open pit in March in the R3 open pit in April. As Orin has explained safety and the weather issues require us to leave high grade ore at the base of the pit in bull for buddies [ph].
We will recover this ore eventually to the underground mine, but the requirement to draw up and more ore than we expect from our low grade sort of stuck by that coupled with the highly dilutive character of the early ore in the first mine and followed in underground mine, they’ll look into the north contact of the ore body is giving us lower than expected carats recoveries during the transition.
This is really a result of being so far ahead of schedule with our project startup and being required to process the ore that we have on hand. As the year progress, we will be rebuilding a stockpile of better quality ore. This give us more processing flexibility and we expect underground mining rigs to increase as we retreat with our mining tunnels to go the center of the ore body. For the time being, we have to eat what we kill as the saying goes.
On slide 15. At this stage, it’s really important to us to have a good experience and ramp up with the underground mine. We had our first production blast in underground mining in December and we have been steadily ramping up production rates from 689 tonnes per day process from underground mine in January; 800 tonnes in February; 209 tonnes March and we mainly have been average to-date 4700 per day, so far. Our target is 6,000 tonnes per day by the end of June.
Our first experience with the Renard underground mining and in fact the old country rock is more competent than we expect and the kimberlite which we expect to have to drill and blast is caving naturally. This offer us the opportunity to move from the block portion shrinkage method to an Assisted Block Cave.
This is something we welcome as we are already set up for this recover money equipment than mine infrastructures and it offer us future saving opportunities and the amount of mine development required and the need to do a ways back to ore from surface. This should be reflect in lower development cost, lower dilution, and higher recover grade. Overall we are very happy with how the underground mine is progressing.
On slide 16, our new ore sorting plant began commissioning in late March and by late April we are sorting all on the compressive basis. Early indications are very positive. The system use primary spectral sorting on crush feed up to 20 millimeters, which is calendar circuit designed to catch any kimberlite that hop in the reject stream.
So far, we are achieving an addition of approximately 20% of ad by volume, we have clear than 1% of kimberlite in the eject stream. Although we are just getting started with this system early indication are that we are seeing positive impact on our diamond recoveries with a cautioning size distribution.
We really need to run this system for several weeks and month to properly assess its impact, but at this stage we can say that we are really encouraged.
Slide 17 shows a cartoon from the basic flow sheet of the mix of ore and waste being sort and rejected. In addition to creating a less of waste and diamond for revision in the main process line, the new ore sorting plant – our sorting plan is living up to its potential to produce increase processing capacity, it is really important.
Reduce plant, we’re and increase the quality of the total kimberlite for disposal. Quad presumably we’re also seeing that the addition of the plant and the early rejection of so much waste from the plant is reducing the plant overall power consumption. We see many applications for this technology and other type of mining operation.
Matt will now wrap this up with a discussion of the outlook.
Thanks Pat. So the ore supply issues, perhaps resulted in lower grades and lower carat recoveries in plant are prompting us to trimmer sales of our guidance for the year in carats produce and carat sold. This is a knock on effecting our guidance for cash cost per carat. So on slide 18 we are showing you the revised guidance. We’re reducing carat production from – to 1.35 to 1.6 million carats from 1.6 million carats. And carat sold to 1.2 to — between 1.2 and 1.25 million carats. There’ll also be larger reduction in carat sold guidance’s due to the timing of our sales.
All other guidance is remaining unchanged at this time. We are tracking well on costs and as we have shown, we are currently meeting our exceeding guidance on pricing. We finished the quarter with $51.6 million in cash and cash equivalents in hand, a total liquidity of 71.9 million. This is comfortable for a business like ours at the stage.
We have prided ourselves on maintaining a strong balance sheet since we raised our project financing in 2014 and we will continue to prioritize this going forward. Obviously, we view sales guidance for this year is going to put pressure on our balance sheet as we complete the final principal capital spends on this project and we fully transitioned to underground mining.
We benefitted from strong relationships with our lenders and primary stakeholders in Quebec
and elsewhere, and we move – and as we move forward, we’re going to be looking to a main terms of certain data instruments to better suit our working capital requirements as an operator and in supports of the further growth of the business. So you should expect to see some guidance on this in the coming months.
Finally, on slide 19, I want to analysts some exploration use. We’ve been ramping up our exploration efforts this year at both Renard and grassroots projects elsewhere in Canada. We’ve been finding at Renard, we have finding evidence of broader field of eruptive activity with our winter Renard — our winter RC drilling.
We’re now funding up this 13, what are called CRBs. The ones close to the Renard mine, CRB or our country operator is just the preparatory halo zone within which the Renard, Kimberlite are praised that’s an evidence of the eruptive activity.
These CRBs are ones we required no proper core drilling to test for the presence of kimberlite diet streams within the more or beneath and blaine [ph]. Also of note though, and illustrated in slide 19, we can report the discovery of a new kimberlite of what we were calling the real property. This is located 80 kilometers north of Elliot Lake, Ontario.
It was found in February, it’s a volcaniclastic diatreme with Kimberlite Indicator minerals and mantle nodules. It’s got interpreted surface expression of 190 meters by 100 meters. And it was discovered with a novel exploration technique that we’d been using. And since this discovery, we’ve acquired a land position here of about 8,600 hectares.
Kimberlites occurred and clusters, the nearest non-kimberlite to the real property is 130 kilometers away. So this discovery is noteworthy for that reason. And another example of a potential new Kimberlite diatreme found by store and it was exploration team. We’ve known for him quite a few. We have submitted sample of this body for micro diamond testing and we await the results.
So, in summary, we’re reporting a quarter here with Renard and expansive carat reduction and we’re just seeing our guidance, but the underlying business is very strong. We’re very happy with how our resource reconciled in the open pit after a year and a half of mining, positive reconciles affiliation, but in 2017.
So we’ve checked that box, very happy with how the underground mining is progressing. We see opportunity here to underground mine, more efficiently and at lower cost. We check that box, very happy with how the ore sorting is progressing, that’s exceeding our expectations, so check that box. And so, positive about the outlook of the business, despite a quarter, this prompting us to reduce our guidance and trim our sales for the year.
And with that, uh, we will be very happy to open this up for questions. Michelle, over to you.
Thank you. [Operator Instructions] Our first question comes from the line of [indiscernible] with Cannacord. Your line is open. Please go ahead.
Thank you. And good morning everybody from Stornoway. A couple of questions, Matt and Orin perhaps on the market, on a like for like basis, your price is going up as you say 20%. If you did it on a like for like basis, are you able in any way to give an indication of how much of the increase is better quality and how much is market? It probably quite a difficult question to answer.
And also are you, given the demand for improved diamond provenance are you giving any thought to selling more into Canada under some kind of a trademark or something like that? And then maybe a question, I guess for Pat, with the new spectral sorting ultimately now that you’ve started it what — how much of the waste do you expect you will be able to scalp? And in that waste, how much kimberlite will you kind of recover that you need to put back in, as some kind of indication?
Okay. So I’ll, I’ll have the first two Daiz [ph] and Pat will handle the last one. So the 20% increase in pricing that is with no consideration of mix, quality or size efficient distribution. So that is a true like versus like. So that is just, you know, maybe about 7% or 8% of that is market. The rest is just people paying more for Renard Diamonds, we’ve had a good experience with them. They’re polishing well, there’s good yields, colors are performing well.
So, that is a genuine, just better results for our goods over that period. So that’s been very gratifying. If you actually look at the overall, I mean, we’re probably seeing about a 30% better results in the first quarter compared to when we started.
If you throw in the mix quality and size distribution, right? So, so we’re seeing three different positive tailwinds on our pricing. We’re seeing a market improving, we’re seeing people just paying more for an Renard goods because they like them. And we’re seeing an improvement in mix.
So, that’s that they’re all fishing in the same direction those trends. And we’re not releasing the fourth sale, where we don’t want you to sort of really say it was one by one. We’ll release it with our second quarter. But the fourth sale has continued that trend in each of those three areas.
On the issue of trademark, what we’ve always said on this one is our business is mining, we’re not going to put too much effort into the marketing of our goods in this area. We will as a professional seller of diamonds, present our goods for others to develop trademarks or brands or run their identity and their businesses and we will support our clients in those efforts.
But it’s, but it’s not something we ourselves are going to put ourselves into. Thanks. Sorry, I’m going to choke to death here. I’m passing this over to Pat to answer the third question.
A – Patrick Godin
So Daiz [ph] to answer your question, we are actually, we are – the ore sorting is with design because we are the ore is going through the primary crusher, going through the scrubber and at the end of the scrubber we have as stream. And what is above 40 millimeter, it is what actually is divert to the ore sorting.
And to get it the system actually we are doing what is above 40 millimeters, but the ultimate designing is to process what is above 20? So actually it’s a, if you look at what is above 40 millimeters is diverted to the ore sorting. Actually we are rejecting 20% of the feed in total. So its approximately 7,000 tons per day we are rejecting 1400 to 1500 tonnes of waste that is excellent. That is above our expectation. Originally we were planning to do 15% with a cut off of 20 millimeters.
So actually it’s a way better than we expected from a performance on the ore sorting. Otherwise in term of rejects, first thing that we are doing is in the first classes we have, we are the ore sorting in the satisfaction, what is above 50 millimeters and 20 millimeters.
And first thing that we are doing is in the process flowing, we are rejecting the waste and that waste is rejected we have a scavenger and that is sorting that is, and we are, if we have kimberlite in the reject, we are returning the kimberlite to the plant.
Originally in our, when we did the feasibility of that, we’re expecting a loss of 2% of the kimberlite that we are passing through the ore sorter. And actually we are less than 1%. So again, we are, we’ll say rejecting more waste and we are more efficient than what is we’re looking to retain kimberlite into plant. So it’s over our expectation actually.
Thanks Pat. Can I just ask a question related to that? So at the end of all of this, you’ll be taking, your mass balance will be changing. So what is the ultimate plan to make sure the plant is fully utilized, given that you’re going to be taking out some of the projected at originally projected feed, which is a waste that you don’t want in there anyway?
Yeah. So this is Orin. I will answer this one. This is a big opportunity for us to expand processing at Renard, it means coming up with ore supply to feed that capacity. So we are looking at a variety of different ways of achieving that.
Some of these different methods of achieving that will have permitting considerations. So, we don’t want to get ahead of our skis here a little bit and what we can promise in this regard. But we’re looking at the concept of – this year we’re going to be drilling at Renard 3 to bring Renard 3 into the mine plant as an underground source of ore earlier.
So we have different headings in two different ore bodies. We’re still going to be restricted on the ramp and trucking capacity. But we’re going that direction. We’re taking a bulk sample this year in Renard 4 because we want to contemplate a, there’s a lot of open pittable ore there Renard 4 but which impacts the lake. So there’s a fish habitat issue and there’s a permitting issue and social acceptability issue there.
But we are — we’re looking at these ways of feeding this hungry machine that we’ve created with the orderly sorting the process plant. Certainly, either the old way sorting is got to do two things for us. It’s got to provide a really good sort and in this area it’s exceeding expectations. I mean, it’s just terrific.
And then the second thing was $50,000 question is, is it improving the quality of the diamonds? And as we say it as early days there, but the early indications are positive in that regard as well. So, the home run for us in ore way sorting is that we’ve increased the capacity of the plant and we improve the quality of the product.
And that’s what we’re going for here. But it’s a little bit of a longer process. It requires a revise mine plan, we’ve got to look at permitting environment, we’ve got to look at, equipment availability and to actually feed that hungry plants. But we’re fully engaged on that.
Thank you buddy.
Thank you. Our next question comes from the line of Scott Mcdonald’s was Scotia Bank. Your line is open. Please go ahead.
Morning guys. Thanks for the update. Just a couple of followup questions on the ore way sorter. So Pat, you said you’re getting 20% of the total feed out, do you think you can do better than that or is that you think you’re already kind of there in terms of getting the circuit running as you want it?
As I said to you, we are – the screen panel sizes for – actually is 40 millimeter. So when will stabilize the circuit and if we can decrease to 20 millimeters. So we will reject more waste, so it will do better than 20%. So for now I think we are over what we are doing is overwhelmed respects and when we will decrease the size of the screen, we’ll do better again.
You don’t have an estimate as to what you could achieve there?
They’re trying to under promise and over deliver on that when I think.
Understandable. Okay. And then you had given in the past. I’m sorry, are you, getting all of the feed through the – that circuit at this point?
Yes. What is above 40 millimeter is going all to the ore sorting.
Okay. So as far as throughput goes, that it’s where you want it to be?
Yeah. In our favor to do those, basically all this is going to be ore sorting.
Yes. Okay. And you had previously given a number from, I think it was from one of your consultants about sort of the level of value loss caused by the breakage. Do you have any sense of where that is now after this? And when we might see the impact in the sales results? Could we see that in the Q2 sales results at all?
I think Q2 might be a bit early to see an impact in that. I mean we’re being cautious to quantify that. I think last year’s AGM we published the breakage data that Patty Lola’s our consultant was doing for us and that indicated levels of breakage and implied grade loss and pride value loss.
And, at its worst we were at 30%, 40% value loss and 20% to 30% implied grade loss. We have been improving on breakage, generally. It began training done probably starting last summer. And that is part of the reason why our pricing has trended up.
We’re trying to stay away from, connecting the amount of waste that we get out with a specific attributes that diamond populations flowing through to specific price sales results. I mean, it’s not necessarily a quantifiable or linear thing.
So we don’t want to turn it into a KPI for our business. But, what we sold, I’m staying away from answering your question directly, Scott, but what we have said is that, we’re doing this because we want to improve the pricing sale and the dollars of revenue in the company and an early indications are encouraging.
That sounds very good. Maybe just moving on to the underground, when you’re talking about using more of the Assisted Block Caving, when do you think you might be able to give us some more details or have a more fulsome assessment of whether or not you can do this? And when might we see actual cost savings?
Before the — actually we are the panel to 90 where we were mining is, is all these lines. So, we are designed to be a block hole shrinkage stopping. But you know, the drop points for these line of everything is the same that for an Assisted Block Cave. So it will not, we’re not having to do more development.
And other development that we did is already fit for an Assisted Block Cave mining methods. So what we originally when we did, that all the geo-mechanical work, we’re not expecting that there’s going to cave, but in reality what we are seeing is it’s a different for us than caving. So we will, we’ll just translating for the mining that to be more vertical, we’re going to be more vertical is going switch to be more resembles, it will give to us more possibility to draw the ore.
And actually it’s a plus for us. So we are transiting 290 for vertical to horizontal mining approach. It’s ongoing. We did the big blast to initiate the cave in the end of April. We blast 270,000 tonnes underground in one shot. So it was a success.
So actually we are initiating that cave and to let it go. So it will be, we’ll see more benefits, when will develop the next mining region because when we’re looking at this will probably be in a position to eliminate one mining algorithm. So we sit out treating development, leaving around to.
And also on the development point of view as we have to assess the cave, we need to do less development in ore and less drilling too. So it’s going to be more efficient.
Yeah, it all sounds good. I am just wondering when we might, — you might be able to provide some numbers on how that could help your costs compared to what your last mine plan you put out was?
I think we’ll see how it goes, and you’ll see any cost savings kind of coming through in our quarterly results on cost and on our budgeting for next year. What I will say the design elements of this here. I mean there was a lot of those little caution put into the design of the original underground mine.
I mean, we assumed that the country rocker run the kimberlite was not competent and would cave and we assumed we would have to drill and blast all our kimberlite then. So what we’ve got is more competent Country rock and a kimberlite is behaving more like as the other kimberlite.
So we’re kind of evolving here towards a much more traditional mining situation and are very cautious and conservative, original main designers is just turning into a more traditional or normal situation and we’re fully set up to do it. Right. So, as Pat said it’s a positive for us and bodes well for the future.
Yeah, sounds good. Look forward to seeing the results. Just one more question, if I may. With respect to the liquidity, you said he started talking to your lenders, which lenders have you spoken to and can you give us a sense of what sort of terms you’re looking to have amended?
And more specifically, do you think you will require any – your lenders to cut any new checks to you? Or are we just talking about rescheduling the existing payments?
Yes, its little bit too early for us to get into details and not. I mean, obviously our senior lender and our biggest shareholders, invest this in Quebec. So, you know, we wouldn’t do anything without talking to them first.
But look, yeah, I mean it’s — we raised all our money in one shot in 2014. Everything we’ve done has been with original project financing. We’ve lived within our one means that our own resources, we intend to do that going forward.
And we’ve always enjoyed very strong stakeholder support. It’s a tight circle of people who are pulling on the rope in the same direction. So we’re, I can say that our discussions are – have been positive to date.
And we are putting it into a quarterly result this that, this quarter that we’re talking to our lenders. Obviously this is the year where, balance sheet gets tight because this is essentially the year that we complete the chunky capital spending as we completely underground mine. But we’re positive about the outlook in this area.
Okay, great. Thanks a lot guys.
Thank you. And our next question comes from the line of Edward Sterck with BMO. Your line is open, please go ahead.
Thanks very much. Good morning guys. Just, most of my questions have been asked. But a couple of questions, just on the large diamonds that you’ve recovered recently. Where they recovered in the large diamond recovery circuit or just in the regular part of the plant?
Yes, they were. Yes.
Okay. And then the next question is, I’m just going, going back to the mine capacity, I’m thinking about, I guess what might be possible in the future. I know you guys don’t get ahead of yourself, but can you just remind me? So the mill capacity before the introduction of the ore sorter I think is around 2.5 million to 2.6 million tonnes. Is that correct?
It’s good one. 7000 tonnes per day.
And then what do you think the maximum whole capacity of the decliners?
It 6,000 tonnes of ore.
Of ore, okay. That’s just me. Thanks so much.
Thank you. And I do show a followup question from the line of Scott McDonald with Scotia Bank. Your line is open, please go ahead.
Hi guys. Just one more quick one, just R 65 pits checking to see are you are way stripping this quarter compared to sort of the full year guidance. This was pretty low and just checking that you’re where you want to be on R 65 and as far as opening that pit up?
Yeah, so the way tripping being low because we were in a thinking cutting ore to Audrey in Q1 one, but in Q2 we already start mining in R 65, its progressing well. And we are planning to build, to provide feed to the plant at the rate of 1000 tonnes per day from a mid-May to year end with R 65 into yearend too. So we are well aligned with R 65.
Okay. Perfect. Great. Thanks again guys.
Thank you. And I’m showing no further questions at this time and I’d like to turn the conference back over to management for any further and closing remarks.
Thanks everyone for joining us and look forward to speaking to some of you individually over the next few weeks and enjoy spring.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day.
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