As part of a financing package announced on October 2, the company has completed a C$10 million private placement with Ressources Québec.
The Quebec government investment vehicle subscribed for 28.57 million Stornoway units at 35c, with each unit comprising one common share and one-half of a common share purchase warrant.
The investment increased Ressources Québec's ownership of the diamond producer to 26.96% from 23.46% previously.
Stornoway also won a two-year deferral of principal payments on the Renard mine road loan. The Quebec government authorised the payment deferral, with documentation expected to be completed by December 19.
The deferral of principal payments on the road loan represents additional liquidity to Stornoway of about $7 million.
The financing package comprised certain debt service cost deferrals over a 24-month period totalling $54 million, an amendment to the Renard diamond streaming agreement comprising a supplementary upfront deposit of $45 million in cash in exchange for certain sales and pricing considerations, and a $30 million private placement of common shares and warrants.
"With the balance sheet strengthened and the Renard mine fully ramped up, this comprehensive deal allows our team to focus fully on the long term operating and cash flow potential of the business," said CEO Matt Manson, who will step down at year-end.
The Renard mine in north-central Quebec has had a tough 2018, first dealing with an ore shortage in the first half of the year and then a challenging underground ramp-up.
Stornoway achieved commercial production at Renard in early 2017, completing the initial openpit operation five months early and under budget.
However, the underground development of the Renard 2 kimberlite, where most of Renard's high-grade ore is, had fallen behind plan. Full production of 6,000 tonnes per day was achieved in late August, two months behind schedule.
Part of the slower than expected ramp-up had to do with a change in the mining method underground from blast-hole shrinkage stopes to assisted block caving.
Stornoway was forced to lower its production guidance in May to 1.35-1.4 million carats from 1.6 million carats, placing pressure on liquidity and cash flow. The company also last month reported a wider net loss of C$37.6 million for the September quarter, compared to an income of $2.3 million a year ago and the previous quarter's loss of $31.3 million.
Stornoway attributed the net loss to a decrease in gross profit, which it said included a $22.4 million write down to bring stockpile, work in progress and finished goods inventories to their net realisable value.
Stornoway shares (TSX:SWY) are down 71% over the past four quarters at C20c, having last peaked at 69c a year ago. The company has a market value of $178.8 million.
