Dominion has embarked on a three-pronged strategy designed to increase net asset value per share. Underpinned by a strong balance sheet, our strategy taps into the exceptional potential of our land package, operations, and product.
Investing in the Growth and Renewal of Our Asset Base
We are advancing a number of key development opportunities at both the Ekati and Diavik mines, and refocusing on exploration in the Lac de Gras region:
Lynx – This small pit is located close to Misery and Jay. Commercial production of high-value carats commenced on schedule in April 2017.
Sable – The Sable pipe is located north of existing Ekati mine infrastructure and is fully permitted. We published the results of a pre-feasibility study in February 2016. Construction is ahead of schedule and we expect to begin pre-stripping in July 2017, approximately seven months earlier than planned. Cost performance is also well below budget expectations. First production of high-value carats is anticipated in fiscal 2020.
Jay – The Jay Project was approved for construction by our Board in July 2016 and is a significant undeveloped deposit at the Ekati mine given its large size and high grade. It extends the mine life by approximately 10 years. Permitting continues to advance, with a decision on the project’s water licence expected in mid-calendar 2017.
Misery Deep – A positive pre-feasibility study was completed in May 2017 on the development of an underground operation at the Misery pipe after completion of mining in the current open pit. Mining of additional high-value ore and the recovery of additional carats below the final profile of the Misery open pit is expected between fiscal 2020 and fiscal 2023, resulting in an enhanced production profile at the Ekati mine.
Fox Deep – Based on successful results from the Fox Deep drilling program at the Ekati mine, indicated resources at the Fox kimberlite pipe increased, as of January 31, 2017, and a high-grade zone has been identified at depth. Completion of a preliminary economic assessment is expected in the third quarter of fiscal 2018, and a pre-feasibility study is scheduled for completion by the end of the fiscal year. If the results of these studies are positive, the Fox Deep project has the potential to extend the life of the Ekati mine significantly.
A-21 – The development of the A-21 pipe at the Diavik mine continues to progress on time and on budget with the completion of the dike and the start of de-watering expected in late calendar 2017. Following waste stripping, processing of ore from the A-21 pipe is expected to start in calendar 2018.
Advanced exploration – With 150 known kimberlites on the Ekati property and the work underway to prioritize targets, our advanced exploration program has the potential to drive significant value growth in a region that hosts some of the richest kimberlites in the world and that we know well. The most advanced exploration targets are the Kodiak and Leslie pipes, which are located within reach of the processing plant at the Ekati mine. A maiden resource for the Leslie pipe was published in May 2017, and a concept study is planned later in 2017.
The CDN $11 million exploration program for fiscal 2018 includes prioritization of kimberlite pipes and planning for a bulk sampling program in fiscal 2019. We plan to drill up to six identified priority targets, including the Kodiak pipe, in the Core and Buffer Zones. The focus is on near-mine targets, which we believe present the best opportunities to drive long-term value because they allow us to leverage existing infrastructure.
Driving Efficiencies and Lowering Operating Costs
A number of efficiency improvements and cost reduction initiatives have been successfully implemented at the Ekati and Diavik mines and we continue to identify new opportunities. For example, we have reduced energy consumption and continue to implement our long haulage strategy at the Ekati mine with the addition of high-capacity road trains, lowering our unit transportation costs significantly. In March 2017, we filed an updated technical report for the Diavik mine, which demonstrated improved economics and supported an extension of the mine life from 2023 to 2025.
We are ramping up to full production at the Fines Dense Media Separation (DMS) plant at Ekati, which will increase the recovery of diamonds smaller than 1.2 millimetres.
We are also taking action on our office space. In fiscal 2017, we sold our downtown Toronto office building for a pre-tax gain of CDN $44.8 million and announced plans to relocate our corporate office from Yellowknife to Calgary in mid-calendar 2017, which is expected to deliver savings of approximately CDN $19 million annually.
Maximizing the Value of Our Product
We will continue to leverage our deep knowledge in diamond sales and marketing to maximize the value of our product.
Our CanadaMarkTM hallmark has been well received by retail consumers who favour the environmental and social stewardship that a Canadian diamond represents, and we plan to extend the brand. We also have strategic initiatives underway for marketing our product by working with clients to move further downstream and capture the premium associated with our Canadian production, and to protect and grow demand for all ranges of our production.