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Dominion Diamond Q4 sales $114 million

Staff writer |
Dominion Diamond Corporation announced its fiscal 2014 fourth quarter and year-end results for the period ended January 31, 2014. For Q4 Ekati recorded sales of $114 million, and incurred cash costs of production of $101.3 million.

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Total cost of sales for Ekati for the fourth quarter were $114.3 million.

For the fourth quarter, Diavik recorded sales of $119.2 million, and incurred cash costs of production of $43.3 million. Total cost of sales for Diavik for the fourth quarter were $87.7 million.

As at January 31 2014, the company held cash and cash equivalents of $224.8 million and restricted cash of $113.6 million.

Consolidated rough diamond sales from the company's ownership in the Diavik and Ekati Diamond Mines for the fourth quarter were $233.2 million compared to $110.1 million for the comparable quarter of the prior year.

This resulted in an operating profit from continuing operations of $21.0 million, consistent with the comparable quarter of the prior year. Consolidated EBITDA from continuing operations was $76.2 million compared to $45.3 million in the comparable quarter of the prior year.

Sales from the Diavik Diamond Mine were $119.2 million generating EBITDA of $59.3 million and EBITDA margins of approximately 50% for the fourth quarter.

Sales from the Ekati Diamond Mine were $114.0 million generating EBITDA of $24.4 million and EBITDA margins of approximately 21% for the fourth quarter. However, this excludes the sale of an estimated 0.2 million carats of production from the processing of satellite material from the Misery South and Southwest pipes, which material was excavated during the pre-stripping operations of the Misery Main pipe, for estimated proceeds of $10.8 million.

During pre-production, sales of diamonds recovered from the Misery South and Southwest material have been applied as a reduction of mining assets. The company estimates that the EBITDA margin would have been approximately 26% if the Misery South and Southwest pipes had been in commercial production during the quarter, therefore allowing the sales of carats from such material to be recognized as revenue.

Included in the exploration costs of $3.3 million for the quarter was $3.1 million of exploration work on the Jay pipe in the Buffer Zone at the Ekati Diamond Mine.

The company recorded a net foreign exchange loss of $7.9 million during the fourth quarter related to the weakening in the Canadian dollar versus the US dollar. This compared to a gain of $0.1 million in the comparable quarter of the previous year.

The company recorded a net income tax expense of $19.0 million during the fourth quarter which includes $13.5 million of tax expense related to the significant weakening of the Canadian dollar versus the US dollar during the fourth quarter, substantially all of which was non-cash tax expense. This is compared to a net income tax expense of $7 million in the comparable quarter of the previous year with a much less significant impact of foreign exchange.

The company recorded a consolidated net loss from continuing operations of $7.8 million or $(0.09) per share for the quarter compared to a net profit from continuing operations of $12.1 million or $0.14 per share in the comparable quarter in the previous year.

At the end of the quarter, the company held rough diamond inventory with an approximate market value of $205 million, of which $40 million of rough diamond inventory had been held as strategic stock from sale as at January 31.

Detailed life of mine plans for both the Ekati Diamond Mine and the Diavik Diamond Mine based on reserves only were published on February 3, 2014.

For the period from April 10, 2013 to January 31, 2014, Ekati recorded sales of $399.6 million and incurred cash costs of production of $303.9 million. Total cost of sales for Ekati for the period were $392.9 million.

For the fiscal year, Diavik recorded sales of $352.3 million and incurred cash costs of production of $162.6 million. Total cost of sales for Diavik for the fiscal year were $257.9 million.

Consolidated sales from continuing operations totaled $751.9 million for the year ended January 31, 2014, compared to $345.4 million compared to the prior year resulting in an operating profit of $51.6 million compared to an operating profit of $47.7 million in the prior year.

Sales from the Diavik Diamond Mine were $352.3 million generating an EBITDA margin of approximately 49% for the year.

Sales from the Ekati Diamond Mine were $399.6 million generating EBITDA of $59.6 million and EBITDA margin of approximately 15% for the period from April 10, 2013 to January 31, 2014.

However, this excludes the sale of an estimated 0.2 million carats of production from the processing of satellite material from the Misery South and Southwest pipes excavated during the pre-stripping operations of the Misery Main pipe for estimated proceeds of $14.3 million.

EBITDA was also impacted by the sale of inventory that was recorded at market value as a result of the acquisition of the Ekati Diamond Mine. The Company estimates that the EBITDA margin would have been approximately 27% if the effect of the market value adjustment to inventory made as part of the acquisition of the Ekati Diamond Mine was excluded and the carats sold from material excavated from the Misery South & Southwest pipes were recognized as revenue.

Gross margin increased 30% to $101.1 million from $77.8 million in the prior year. Consolidated EBITDA from operations was $191.7 million compared to $127.9 million in the prior year.

Exploration expense of $14.6 million was incurred during the year which compares to $1.8 million in the prior year. Included in the exploration costs for fiscal 2014 are $10.1 million of exploration work on the Jay pipe in the Buffer Zone at the Ekati Diamond Mine and $4.5 million of exploration work on the Company's claims in the Northwest Territories.

The Company recorded a foreign exchange loss of $8.9 million during the year related to the weakening in the Canadian dollar versus the US dollar. This is compared to a gain of $0.5 million in the prior year.

The Company recorded a net income tax expense of $35.5 million during the year which includes $20.7 million of tax expense related to the significant weakening of the Canadian dollar versus the US dollar during the period, substantially all of which was non-cash tax expense.

This is compared to a net income tax expense of $15.3 million in the prior year with a much less significant impact of foreign exchange.

Included in the fiscal 2014 financial results are $3.2 million (after tax) of restructuring costs at the Antwerp, Belgium, office as a result of the integration of Dominion Diamond and Ekati's sales teams, $11.4 million (after tax) of Ekati acquisition costs and $10.6 million (after tax) of expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati Diamond Mine acquisition.

The Company recorded a consolidated net loss from continuing operations attributable to shareholders of $23.0 million or $(0.27) per share.


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