Off topic but maybe of interest...Will P on Mpvd/Kdi Dermot Desmond and David Whittle's Mountain Province Diamonds Inc. (MPVD) slid 15 cents to $3.40 on 1.38 million shares on word that it plans to acquire Mr. Desmond and Dr. Rory Moore's Kennady Diamonds Inc. (KDI) through a friendly merger. Kennady jumped 45 cents to $3.20 on 690,000 shares on the news, since Mountain Province is offering 0.975 of a share for each Kennady share in the stock transaction, a 26-per-cent premium to Friday's close.
Mountain Province is also buying four million Kennady shares at $2.50 per share in a concurrent transaction, providing cash that will tide Kennady over while the arrangement is completed. The merger will give Mountain Province, which owns a 49-per-cent interest in the Gahcho Kue mine, 250 kilometres northeast of Yellowknife, a 100-per-cent interest in the Kennady North project, just north of Gahcho Kue. Kennady's shareholders will account for 24 per cent of the shares issued by the expanded Mountain Province once the deal closes.
Mr. Whittle, Mountain Province's interim president and chief executive officer, says that the Kennady North assets are a strong complement to Mountain Province's Gahcho Kue mine, as they significantly add to the company's resource base. He points out that Kennady's exploration program at the Kelvin and Faraday kimberlites has been very successful, adding that he has high confidence in his company's ability to continue that success. Dr. Moore, Kennady's president and CEO, says that he is excited that his shareholders will have the opportunity to benefit from the near-term cash flow from Gahcho Kue, while retaining exposure to the significant exploration upside offered by the Kennady North assets.
The cheerful comments aside, the move seeks to nullify the 2012 spinoff of Kennady from Mountain Province. At that time, Mountain Province's then president and CEO, Patrick Evans, said that the separation of the two companies was intended to deliver greater value to Mountain Province's shareholders by unlocking the value of Kennady North through the creation of Kennady Diamonds. It clearly worked: Through the 2012 spinoff, Mountain Province's shareholders received one Kennady share for every five Mountain Province shares they held. Now, they will be getting nearly a full Mountain Province share for each Kennady share that they hand back -- a nearly four-fold gain.
The move also reverses the separation of management between the two companies. In the spring of 2016, Kennady Diamonds' chairman, said that Dr. Moore would succeed Mr. Evans as the company's president and CEO to advance the governance separation of Kennady from Mountain Province. Jonathan Comerford, chairman of Kennady, said this was important, as the Kennady North project had reached such an advanced stage that it needed the time and attention of a dedicated head. (Mountain Province nudged Mr. Evans out of his role as president and CEO of Mountain Province the following year.)
The acquisition of Kennady gives Mountain Province the 13.62 million carats indicated at Kelvin, worth $63 (U.S.) per carat, and the 5.02 million carats inferred at Faraday, worth an estimated $98 (U.S.) per carat. Those carats may come in handy once the Gahcho Kue mine winds down, presumably some time in the 2030s, but they are unlikely to be mined before then, unless Mountain Province can prove that a standalone mine could be profitable. (De Beers is unlikely to delay processing of its ore with rock from Kennady North, in which it currently has no interest.)