Construction for Stornoway Diamond's (TSE:SWY) Renard mine in Quebec remains on track and on budget for initial production in the second half of 2016.
The company recently reported fiscal third quarter results for the quarter ending January 31 which were in line with expectations, Dundee Capital Markets analyst Matthew O'Keefe wrote in a research note on Stornoway dated March 12.
The diamond developer had cash and equivalents of $322 million at January 31, with the first US$80 million payment from a streaming agreement expected in March. Net earnings were also positive in the quarter at 1 cent per share, as a result of the Canadian/US exchange rates.
Stornoway, whose Renard project is fully funded to production which should average 1.6 million carats per year over a 20-year life, said overall construction is 17.4 percent complete, ahead of the planned 15.6 percent.
Costs and commitments have totaled $225 million, 27.7 percent of the total budget. The company said it completed permanent camp, waste water and potable water plants at Renard during the latest quarter, while also having started pre-stripping in the R2 and R3 pit.
"All-in-all, good progress has been made," said O'Keefe, who has a buy rating and C$1.30 price target on Stornoway.
The next item on the company's agenda is the 2.2 million tonnes per year diamond plant, with the first pouring of concrete foundations expected to commence in April. The plant must be completed by the final quarter of this year, Dundee said, to allow for the installation of crushing and recovery circuits in the first half of 2016.
Full production of the Renard mine is expected in the summer of 2017.
A resource update at Renard 2, on the back of 2014 deep drilling, is expected by the end of the second quarter, which should upgrade current inferred material and add resources at depth.
Other near term catalysts include bulk sample results from Stornoway's joint venture Qilalugaq project in April, and drill results from new targets at the Pikoo discovery in Saskatchewan, in which Stornoway holds a 20 percent interest.
"As the company nears production, we would expect the stock to rise and our multiple to expand towards its diamond producing peers that currently trade at an average of 0.78x NAV," said Dundee's O'Keefe.
Shares of Stornoway closed at 62 Canadian cents on Thursday, giving the company a market cap of just over $454 million. Year-to-date, the stock has climbed almost 17 percent.