from stockwatch by Will Purcell
The diamond and specialty minerals stocks box score on Friday was a weak 71-105-124 as the TSX Venture Exchange fell two points to 739 while polished diamond prices inched lower.
Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD), up five cents to 36 cents on 402,000 shares Thursday on the company's second quarter financials, dropped one-half cent to 35.5 cents on 69,000 shares today. Mountain Province racked up a $39-million operating loss in the quarter ended June 30, compared with a $12.8-million gain the previous year, largely as a result of the COVID-19 pandemic that crushed rough diamond prices and closed most traditional avenues for selling rough diamonds.
Indeed, Mountain Province managed revenue of just $34-million during the quarter, barely one-third of what it had a year earlier. The company sold 757,000 carats during the latest quarter for an average of just $33 (U.S.) per carat, about half of what it averaged a year ago and nearly 80 per cent less than what the company eagerly suggested would be possible in its overly optimistic promotional presentations in the early 2010s. Even with rough prices running at half of what a feasibility study projected, the company was doing acceptably well with its 49-per-cent share of the Gahcho Kue mine. Unfortunately, the second halving of rough diamond prices thanks to COVID-19 has Mountain Province in dire straits, at least for now.
Mountain Province has been busy this spring renegotiating covenants and other arrangements to relieve the crushing burden of the debt it incurred to cover its share of the billion-dollar mine back in the mid-2010s. Negotiations continue, and Mr. Brown, president and chief executive officer since 2018, says that more changes are needed. The company remains current on its payables, but Mr. Brown and his crew acknowledge that the company does need further liquidity and will be seeking a "financing solution that is agreeable to our lenders."
That solution could take a variety of forms, they say, although to keep the lenders in an agreeable mood, an equity injection appears likely, at least in part. Mountain Province does say that it has a solution in mind to provide the needed liquidity, one that is progressing well and one that Mr. Brown believes "is going to be favourably received." Time will tell on that score, but there is not much time to wait as a solution will be needed soon, the company acknowledges.
There is a glint of sunshine on the horizon, as Mr. Brown believes that the company will resume its regular rough diamond sales in September. The company sold $22.6-million (U.S.) of rough in the second quarter to Mr. Desmond's Dunebridge Worldwide Inc. It sold another $20-million (U.S.) of rough to Dunebridge in the current quarter and expects to sell all $50-million (U.S.) of rough as contemplated under the arrangement before the end of September, That will help tide the company over until its regular sales resume -- if those sales resume on time and with reasonable volumes.
Mr. Brown does have encouragement to offer on that score. He says that Mountain Province is anticipating its resumed sales in Antwerp will contain similar amounts of diamonds as previous tenders, given that Gahcho Kue continues to run and the diamond buyers and jewellery manufacturers have to ramp up for the coming holiday seasons. As well, Mountain Province has been unable to get its better goods to market -- all the specials and fancies remain stuck in Yellowknife -- so the quality of gems available for sale should be better come fall than those that Mr. Desmond's Dunebridge has been buying.
Mr. Brown and his crew are optimistic that Mountain Province has been successful at "burning through the noise" generated by the pandemic panic. Now, with a bit of luck, perhaps the company can soon stop burning through its much-needed and hard-to-come-by cash.