by Will Purcell The diamond and specialty minerals stocks box score for Monday was a so-so 81-89-140 as the TSX Venture Exchange fell six points to 563. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) languishes despite its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories continuing to yield a diamond bounty. Unfortunately, prices for its bumper crop remain depressed -- indeed depressing -- and so what was a $7 stock in 2016 struggles at just 19 cents today, up one-half cent on 15,000 shares, as some long-term plans for the mine appear in jeopardy.
Enthusiasm greeted word that De Beers would stop manufacturing synthetic diamonds for sale as gems, but all but lost was concurrent word that the company was also pausing exploration and development projects in Canada. While mining will continue at Gahcho Kue, which De Beers operates with its 51-per-cent interest, some key life-extending projects are now in jeopardy. (Paused is the word used officially by De Beers, although the pause officially began late last year.)
A year ago, Mr. Wall, Mountain Province's president and chief executive officer, applauded De Beers's work to discover and delineate deeper kimberlite in and around the three main kimberlite deposits at Gahcho Kue. Those areas, the Tuzo Deeps and the Northwest Extension arm at Hearne, along with a new extension running northeastward from Tuzo, were expected to add millions of carats and push the life of the mine into the 2030s. Mr. Wall cheered the exploration results at the time, noting that his company and De Beers were looking at "ways to recover this deeper kimberlite by underground mining."
The story changed late last year as rough diamond prices continued to fall. Given the "challenging state of the current rough diamond market," said Mr. Wall, Mountain Province and De Beers agreed to "pause all discretionary spending and cut costs where appropriate to focus on maximizing cash generation" at the mine. That pause included a halt to work on the possible underground expansion. Further, it was expected to last long enough that Mountain Province decided to "transition" Tom McCandless from his full-time role as vice-president of exploration to an as-needed consulting arrangement.
And so, beyond the now halted work to assess the Hearne and Tuzo extensions, there is the question of the deeper carats deep in Tuzo, and the resources present at Kennady North, 10 kilometres to the northeast of the mine. Gahcho Kue lists a 10-million-tonne inferred resource deep at Tuzo that grades 1.7 carats per tonne, good for 17 million carats, and there is even deeper kimberlite identified as a target for further exploration. All those carats, inferred and potential, would require underground mining.
Further, there are 21 million additional carats at Kennady North. At last report, the Kelvin pipe held 8.5 million tonnes of kimberlite and at 1.6 carats per tonne the rock holds about 13.6 million carats. At the nearby Faraday bodies, Faraday 2 hosts 2.07 million tonnes inferred at 2.63 carats per tonne, while Faraday 1-3 holds 1.87 million tonnes inferred at 1.04 carats per tonne -- good for a further 7.35 million carats. Those bodies are not carrot-shaped pipes; instead, they slope toward depth and underground mining would likely be required to extract most of the gems.
Mountain Province owns a 100-per-cent interest in the Kennady North kimberlites and that is a complicating factor. De Beers has shown no urgency in negotiating a way back into a 51-per-cent share of the Kennady project since the matter came up six years ago. Worse, given the continuing pause with exploration at Gahcho Kue, De Beers is unlikely to show much interest in Kennady North barring a market turnaround. Meanwhile, while the open-pit operations at Gahcho Kue are progressing well from a mining perspective, the available resources are starting to thin.