Dominion Diamond Corporation Reports Fiscal 2017 Third Quarter Sales And Ekati Production Results

Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the "Company" or "Dominion") reports Ekati Diamond Mine and Diavik Diamond Mine third fiscal quarter 2017 (August 1, 2016 to October 31, 2016) sales and Ekati Diamond Mine production results. Unless otherwise specified, all financial information is presented in U.S. dollars.

Highlights
  • Ekati and Diavik Rough Diamond Sales:
    • Third fiscal quarter diamond sales 1 were $102.7 million from the sale of 1.2 million carats (Q3 fiscal 2016 2 - $145.0 million from the sale of 0.8 million carats).
  • Ekati Production (100% basis):
    • During Q3 fiscal 2017, the Ekati Diamond Mine recovered 1.0 million carats from 0.4 million tonnes of ore processed (Q3 fiscal 2016 - 0.8 million carats recovered from 0.9 million tonnes processed).
    • During the quarter, tonnes of ore processed were significantly reduced as a result of the fire at the Ekati process plant that occurred on June 23, 2016 and the subsequent shutdown of the process plant.
    • The Ekati process plant resumed operations at full capacity on September 21, 2016 and prioritized processing of higher value ore from Misery Main open pit and Koala underground operations.
    • Carat production was positively impacted during the quarter from the processing of a high proportion of high grade Misery Main ore.

(1) Excluded from the Ekati sales recorded in the third fiscal quarter of 2017 is $9.3 million from the sale of 61,000 carats from the processing of material from the Misery Main open pit produced during the pre-commercial production period. (2) Excluded from the Ekati sales recorded in the third fiscal quarter of 2016 is $1.8 million from the sale of 30,000 carats from the processing of material from the Misery Northeast pipe produced during the pre-commercial production period.

Sales Ekati and Diavik Rough Diamond Sales The Company recorded total third fiscal quarter sales of $102.7 million from the sale of 1.2 million carats. Total carats sold increased by 56% and rough diamond sales decreased 29% in the third fiscal quarter versus the prior year primarily as a result of both the process plant fire at the Ekati Diamond Mine, which resulted in a reduction in the value of goods available for sale in the quarter, and the carryover of lower average value goods from both the Ekati and Diavik Diamond Mines in the second quarter of fiscal 2017 for sale in the current period. Two rough diamond sales were held during the quarter. The Company plans to hold three rough diamond sales in the fourth fiscal quarter of 2017.
Sales Summary

Sales ($ millions)
 

Three monthsended Oct 31,2016
 

Three monthsended Oct 31,2015
 

Nine monthsended Oct 31,2016
 

Nine months endedOct 31,2015
Ekati Rough (100% basis) $54.8 $88.2 $243.2 $353.3
Diavik Rough (40% basis) $47.9 $56.8 $197.7 $189.1
Total Sales (1) $102.7 $145.0 $440.9 $542.4
 

Carats Sold (000s)
Ekati Rough (100% basis) 527 480 2,741 1,701
Diavik Rough (40% basis) 715 315 2,442 1,271
Total Carats Sold (1) 1,242 795 5,183 2,972

(1) Excluded from the Ekati sales recorded are carats from the processing of material during a pre-commercial production period. During the third quarter for fiscal 2017, the Company sold 61,000 carats of such production for proceeds of $9.3 million (Q3 fiscal 2016 - $1.8 million from the sale of 30,000 carats of Misery Northeast). For the nine months ended October 31, 2016, the Company sold 210,000 carats of such production for proceeds of $22.0 million (YTD Q3 fiscal 2016 - $7.3 million from the sale of 104,000 carats of Misery Northeast).

The Diamond Market The positive market condition of the first half of calendar 2016 was followed in the third quarter by more muted demand as the rough diamond cutting and polishing industry approached the annual shutdown period for Diwali in India. Caution prevailed in the diamond pipeline as polished diamond stocks built up through the quarter, but stable US retail demand has built expectations for a good holiday season beginning in earnest after the presidential election. The market for lower priced rough diamonds was particularly subdued in the third quarter but demand for these goods is cyclical, with decreased demand being typical at this time of year. Demand for these lower priced rough diamonds is expected to return in the fourth quarter.

The retail jewelry market in China was noticeably more active as evidenced by a positive Hong Kong trade show in September. Mainland based jewelers are more upbeat than their Hong Kong based counterparts who are still suffering from subdued demand in the local market. The retail jewelry market in India showed signs of a return to normality in the Diwali period, however local currency restrictions have caused unease amongst jewelry retailers in the run up to the wedding season.

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