DOMINION DIAMOND CORPORATION
DOMINION TO PROCEED WITH JAY DEVELOPMENT BASED ON POSITIVE
FEASIBILITY STUDY AND PROVIDES UPDATED LIFE OF MINE PLAN
Jay Feasibility Study Results
July 2016
Forward Looking Information
Caution Regarding Forward Looking Information
Certain information included herein that is not current or historical factual information, including information about estimated mine life and other development plans
regarding mining activities at the Ekati Diamond Mine, estimated economics of the Jay pipe, estimated mineral reserves and mineral resources, projected capital and
operating costs, future diamond price, future diamond jewelry demand and diamond production, and future exchange rates constitute forward-looking information or
statements within the meaning of applicable securities laws. Forward-looking information can generally be identified by the use of terms such as “may”, “will”, “should”,
“could”, “expect”, “plan”, “anticipate”, “foresee”, “appears”, “believe”, “estimate”, “predict”, “continue”, “modeled”, “hope”, “forecast” or other similar expressions concerning
matters that are not historical facts. Forward-looking information is based on certain factors and assumptions including, among other things, the current mine plan for the
Ekati Diamond Mine; mining, production, construction and exploration activities at the Ekati Diamond Mine; the timely receipt of required regulatory approvals; mining
methods; currency exchange rates; estimates related to the capital expenditures related to bring the Jay pipe into production, required operating and capitals costs; labour
and fuel costs; world and US economic conditions; future diamond prices; and the level of worldwide diamond production. These assumptions may prove to be incorrect.
Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what the Company
currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining
operations, risks associated with joint venture operations, risks associated with the remote location of and harsh climate at the Ekati Diamond Mine, risks resulting from the
Eurozone financial crisis, risks associated with regulatory requirements, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the
risk of fluctuations in the Canadian/US dollar exchange rate and cash flow and liquidity risks. Actual results may vary from the forward-looking information. Readers are
cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this presentation, and should not rely upon this information as
of any other date. While the Company may elect to, it is under no obligation and does not undertake to, update or revise any forward-looking information, whether as a
result of new information, further events or otherwise at any particular time, except as required by law. Additional information concerning factors that may cause actual
results to materially differ from those in such forward-looking statements is contained in the Company's filings with Canadian and United States securities regulatory
authorities and can be found at www.sedar.com and www.sec.gov, respectively.
Technical Information
The scientific and technical information contained in this presentation has been prepared and verified by Dominion, operator of the Ekati Diamond Mine, under the
supervision of Peter Ravenscroft, FAusIMM, of Burgundy Mining Advisors Ltd., an independent mining consultant, and a Qualified Person within the meaning of National
Instrument 43-101 of the Canadian Securities Administrators. Dominion was assisted by Danny Tolmer, P.Eng., of Golder Associates Ltd., who supervised the probable
mineral reserve estimate, and John Cunning, P.Eng., of Golder Associates Ltd., who supervised the capital development cost estimates for the construction of the dike and
its associated infrastructure, including roads and pumping infrastructure, each of whom is a Qualified Person within the meaning of National Instrument 43-101. Each
Qualified Person has reviewed and approved the information in this presentation relevant to the Jay Feasibility Study for which they are responsible.
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Feasibility Study Demonstrates Technically and
Economically Sound Project
Executive Summary of Highlights
Positive project economics
• 100% Basis: US$398M after-tax
NPV7, IRR 15.6%
• Dominion share: US$278M after-tax
NPV7, IRR 16.7%
Platform for future growth at Ekati
• 44.7 M tonnes of probable reserves
@ 1.8 carats/tonne
• Mine life extended to 2033
Self-funded development
• Existing cash and internally
generated cash flows to fund project
Development schedule aligned with
positive market outlook
• Development: calendar 2017-2021
• First ore: calendar 2022
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Jay: Extension of Ekati Mine
› Jay is located 25 km
from the Ekati mine
along the Misery Road
› 7 km northeast of Misery
Pit operations
› Within the Buffer Zone
Joint Venture Property
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Jay: Brownfield Project Leverages Existing Infrastructure
Leveraging existing
infrastructure:
› Process plant
› Power plant
› Waste management
› Airstrip
› Misery haul road and
power line
› Misery pit (water management)
› Lynx pit (water management,
granite rock)
› Koala and Panda pits (processed
kimberlite management)
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Integration into Extended Ekati Life-of-Mine Plan
Jay represents long-term, steady and significant production for an additional
13 years
› Ekati Life-of-Mine Plan
updated to integrate
Jay, Sable, and existing
operations
› Consistent ore feed
through FY34
› Misery Deep, Fox
Deep, and coarse
processed kimberlite
represent future plant
feed upside potential
Note: Operating Case shown which does not include the impact of the process plant fire that occurred in Q2 FY17. Lynx and Jay are part of the Buffer Zone. All other deposits are part of the Core
Zone. Misery South and Southwest are currently inferred mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources
are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the operating
case mine plan will be realized.
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Life-of-Mine Increased Carat Recoveries
› Including Jay, total Ekati
mine life of 18 years
› With Jay, Ekati expected
to produce 116 M carats
› Carat recoveries
increase substantially in
later years of mine plan
as Jay Volcaniclastic
Kimberlite (VK) ore
processed
Note: Operating Case shown which does not include the impact of the process plant fire that occurred in Q2 FY17. Lynx and Jay are part of the Buffer Zone. All other deposits are part of the Core
Zone. Misery South and Southwest are currently inferred mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources
are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the operating
case mine plan will be realized.
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Feasibility Study Economics Compared to PFS Study
Key Financial and Project Highlights
Release Date
Mined Waste
Mined Kimberlite
Strip Ratio
Recovered Carats
Recovered Grade
Initial Development Capital
Pre-Stripping Capital
Sustaining Capital
Life-of-Mine Exchange Rate
Life-of-Mine Operating Costs
Base Case Diamond Price
Base Case Diamond Price Book
Post-tax NPV (incremental)
Real Discount Rate
Mine Operational Life
Post-tax IRR
Jay Feasibility Study
Jay Pre-Feasibility Study
July 2016
136.0 million tonnes
44.7 million tonnes
3.0
78.6 million carats
1.8 carats per tonne1
US$647 million3
US$33 million3
US$183 million3
1.33 CAD per USD
US$2,676 million
US$53 per carat
November 2015
US$398 million5
7%
13 years
15.6%3
January 2015
182.1 million tonnes
45.6 million tonnes
4.0
84.6 million carats
1.9 carats per tonne2
US$657 million4
US$33 million4
US$148 million4
1.10 CAD per USD
US$3,098 million
US$64 per carat
October 2014
US$610 million5
7%
11 years
16.2%3
Note: US$ figures for Jay FS and PFS refer to unescalated 2015 and 2014 United States dollars, respectively. All figures are on a 100% basis. All tonne totals refer to dry metric tonnes.
1.
The recovered grade in the Jay FS is reported at a 1.0 mm cut-off (based upon diamonds that would be recovered by the Ekati bulk sample plant using 1.0 mm slot de-grit screens) and includes the
contribution of additional carats recovered after commissioning of a Fine Dense Media Separator (“Fine DMS”) unit in the Ekati processing plant.
2.
The recovered grade in the Jay PFS is reported at a 0.5 mm cut-off (based upon diamonds that would be recovered by the Ekati bulk sample plant using 0.5 mm slot de-grit screens). As detailed in the
February 23, 2016 news release issued by the Company, during the Jay FS review the 1996 and 2006 bulk sample results were reinterpreted and it was determined that they were processed at smaller
slot screen cut-offs than was originally assumed for the Jay PFS.
3.
The Jay FS estimate is at an assumed exchange rate of 1.33 CA$/US$ in calendar 2016 and thereafter, and includes a US$75 million contingency.
4.
The Jay PFS estimate is at an assumed exchange rate of 1.135 CA$/US$ in calendar 2015 and 1.10 CA$/US$ in calendar 2016 and thereafter, and includes a US$83M contingency.
5.
After taxes/royalties and unleveraged. Key applicable taxes assumed include a 13% Northwest Territories royalty rate and 26.5% statutory income tax rate.
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Capital Expenditure Summary
Feasibility Study capex, US$ millions
Dike, roads, and pumping systems
Mining & support equipment
Engineering, design, & consulting
Process plant upgrades
Project team
Truck shop
Power connection
Construction camp
329
86
42
40
22
15
13
13
Environmental
9
Road upgrades
4
Total without contingency
572
Contingency
75
Total initial development capital
647
Pre-stripping
33
Total incremental capital
680
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Strong Financial Position
Strong cash position, clean balance sheet and strong free cash flow
generation support both Dominion’s project development and capital
allocation strategy
Financial Position Q1 FY2017:
Sources:
Uses:
US$227 million unrestricted cash
Cash on hand
Jay, Sable, and A21
development capex
US$210 million of un-used credit
facility
Expected cash flows
Sustaining capex
Sale of Toronto office
building
Enhanced dividend
NCIB
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Economic Sensitivities
IRR
(Percent)
Base case
assumptions
Low IRR
(Percent)
Base IRR
(Percent)
High IRR
(Percent)
Real price growth
(0% to 3.5%)
2.5% real p.a.
6%
16%
19%
CA/US exchange rate
(-20% to +20%)
1.33 CA$/US$
10%
16%
22%
Initial price
(-15% to +15%)
US$53/ct
11%
16%
20%
Operating costs
(+20% to -10%)
US$2,676 M
12%
16%
18%
Initial capex
(+20% to -10%)
US$680 M
13%
16%
17%
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Jay Pipe Geology and Drilling
Three lithological domains:
› Resedimented volcaniclastic kimberlite (RVK)
• Uppermost 140 to 190m
• Lower grade, higher average $/carat value
› Volcaniclastic kimberlite (VK)
• Higher grade, lower average $/carat value
› Mixed or transitional zone (MIX)
• 20 to 70m thick interbedded material
Three reverse circulation drill programs
completed (1996, 2006, 2015):
› In aggregate, 2,347 tonnes sampled with 4,149 carats
recovered
› Deposit remains open at depth – exploration target
below 0m masl (meters above sea level)
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Jay Pipe Mineral Resources and Mineral Reserves
(100% basis)
Kimberlite Pipes
Zone Location
Jay
Buffer
Measured Resources
Indicated Resources
Inferred Resources
Type
Mt
Ct/t
M ct
Mt
Ct/t
M ct
Mt
Ct/t
M ct
OP
-
-
-
48.1
1.9
89.8
4.2
2.1
8.7
Note: Totals may not add up due to rounding
Kimberlite Pipes
Zone Location
Jay
Buffer
Proven Reserves
Probable Reserves
Proven and Probable
Type
Mt
Ct/t
M ct
Mt
Ct/t
M ct
Mt
Ct/t
M ct
OP
-
-
-
44.7
1.8
78.6
44.7
1.8
78.6
Note: Totals may not add up due to rounding
Notes:
1.
Mineral Reserves and Mineral Resources have an effective date of March 31, 2016. The Mineral Resources were prepared under the supervision of Peter Ravenscroft, FAusIMM, of Burgundy Mining
Advisors Ltd., an independent mining consultancy. The Mineral Reserves were prepared under the supervision of Danny Tolmer, P.Eng., of Golder Associates Ltd. Mr. Ravenscroft and Mr. Tolmer are
both Qualified Persons within the meaning of National Instrument 43-101.
2.
Mineral Reserves and Mineral Resources are reported on a 100% basis. Mineral Resources are inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
3.
Mineral Reserves and Mineral Resources are reported in accordance with CIM Definition Standards.
4.
The reference point for the definition of Mineral Reserves is at the point of delivery to the process plant.
5.
Mineral Resources are reported at a +0.5 mm cut-off (based upon diamonds that would be recovered by the Ekati bulk sample plant using 0.5 mm width slot de-grit screens).
6.
Mineral Reserves are reported at a +1.0 mm cut-off (based upon diamonds that would be recovered by the Ekati bulk sample plant utilizing 1.0 mm slot de-grit screens and equivalent to the current
Ekati Process Plant recovery and inclusive of the Fine DMS circuit). Overall estimated Process Plant diamond recovery relative to resource grade is 96-98%, depending on the rock type.
7.
Mineral Reserves will be mined using open pit methods. The Jay Mineral Reserve estimate assumes an overall dilution of 2% and mining recovery of 98%.
8.
Dominion is the operator of the Ekati Diamond Mine and has a majority interest in the Buffer Zone Joint Venture area.
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Timeline to Development
Calendar Years
2015
2016
2017
2018
2019
2020
2021
2022
Feasibility Study
Environmental
Assessment
Minister’s
Response
Permitting
Road Construction
Dike Construction
Instrumentation &
Dewatering
Waste Stripping
Ore Production
Open water construction seasons
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Steady, Real Growth in Diamond Jewelry Demand
Jay well-positioned to capitalize on favourable market dynamics
• Consumers based in both mature and
emerging markets
• Demand for diamond jewelry grows
with GDP and resilient to macroeconomic shocks
› Real demand growth expected
Real Diamond Jewelry Demand*
US$ Billion (2015 PRICES)
› Globally diverse consumers
120
100
3.4% CAGR
80
• India and China forecasted to experience
real CAGRs of 6%-7%
60
• Mature markets forecasted to grow at
lower rates
40
20
2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
* DDC analysis, based on 2015 prices, non-recycled diamond jewelry
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Commercial Goods Have Shown Strong Price Trends
Price growth is strongest for the types of diamonds Jay will produce
› Polished diamonds range in physical
characteristics including differing colors
and clarities
2011-2015 Rapaport Price
List Change
10%
› Democratization of diamond jewelry and
• Polished diamonds in lower colors (e.g. K- M)
have outperformed better colors (e.g. D-F)
• Better clarities (IF-VVS) have shown weaker
price performance than lower clarities
8%
2011-2015 CHANGE IN PRICE LIST (%)
resilience of mass market jewelry has led to
stronger price trend in lower quality polished
diamonds
6%
4%
2%
0%
D
E
F
G
H
I
J
K
L
M
Polished diamond color
14%
12%
10%
8%
6%
4%
2%
0%
-2%
Source: DDC analysis using Rapaport 2015 Diamond Statistics. Average price for each colour/clarity category, 0.3ct-2ct polished.
IF
VVS
VS
SI
I
Polished diamond clarity
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Rough Diamond Supply Expected to Diminish,
Particularly for Lower-Average Price Production
MCTS
(by mine average US$/ct)
160
140
120
100
80
60
40
20
2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
≥US$150/ct
US$70/ct
-US$150/ct
≤US$70/ct
2015-2023E % Change in
Production Volume
MINE AVERAGE US$/CT PRODUCTION (2015 PRICES)
Rough Diamond Production
≥US$150/ct
US$70/ct
-US$150/ct
≤US$70/ct
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Source: DDC analysis of industry annual reports, resources/reserve statements, investor presentations, KPCS
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Summary
Jay Feasibility Study:
› Demonstrates a technically and economically
sound project
› Fully funded from cash and future cash flows
› Supports strategy for growing Dominion, with
Ekati as one major platform for expansion
› Strong diamond market dynamics aligned
with Jay development
› Dominion well-positioned to pursue other
potential growth opportunities near existing
operations
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Dominion Provides Clear Direction on Capital Allocation
Strategy
Delivering Value To Shareholders Through
Disciplined investment in development
opportunities
• Jay, Sable & A21 approved
development projects
• Exploration potential
Returning capital to shareholders
• Intention to commence an normal
course issuer bid to purchase up to
6.15 million shares
• Confirmation of minimum level
dividend for fiscal 2017 of US $0.40
per share
• Intention to enhance base level of
dividends
Divesting of Non-core Asset
• Selling of 100% owned downtown
Toronto office building
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DOMINION DIAMOND CORPORATION
DOMINION TO PROCEED WITH JAY DEVELOPMENT BASED ON POSITIVE
FEASIBILITY STUDY AND PROVIDES UPDATED LIFE OF MINE PLAN
Jay Feasibility Study Results
July 2016