Up up and away The diamond and specialty minerals stocks box score on Wednesday was an upbeat 109-76-125 as the TSX Venture Exchange rose fractionally to 596. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) jumped six cents to 71 cents on 929,000 shares.
Mountain Province is calling a special meeting for the beginning of December, where shareholders will (hopefully) be asked to approve a potential refinancing of the senior secured second-lien notes that remain outstanding. The initial value of the notes was $330-million (U.S.) when they were issued late in 2016, but the company has repurchased quite a bit of them lately and at last report the balance was $273.5-million (U.S.).
Mr. Wall, president and chief executive officer, says that Mountain Province "continues to engage with certain major existing bondholders" about a potential debt instrument that would replace the notes. The group of bondholders includes a company owned by Mr. Desmond, Mountain Province's largest shareholder, Mr. Wall says, adding that should the company and the relevant bondholders decide to proceed with such a transaction, it will seek disinterested shareholder approval at the special meeting.
Getting a new financing in place to repay the notes that will otherwise come due in December is of course critical for the company, so the term "disinterested shareholders" is a misnomer. As to who the bondholders are -- those relevant or otherwise -- is unclear, at least beyond Mr. Desmond, who is believed to hold about $60-million (U.S.) of the outstanding balance.
With Mr. Desmond playing a role befitting someone who is probably the most relevant of the bondholders -- and who is clearly the company's most interested shareholder -- it appears likely that Mountain Province will be able to kick its remaining debt farther down the road. Indeed, Mr. Desmond has come to the company's aid before, allowing Mountain Province to keep its financial head above water through the COVID-19 crisis.
In the summer of 2020, with Mountain Province unable to sell its rough diamonds, Mr. Desmond galloped his white horse to the rescue, buying $50-million (U.S.) of the company's diamonds at market prices -- for a song, in other words -- which provided the company with enough cash to pay its bills and carry on. Mr. Desmond made out well, of course, as his company was able to sell the diamonds at a solid profit within a year, but the arrangement had Mountain Province getting a share of those profits as well.
Then, early this year, Mr. Desmond agreed to provide Mountain Province with a $50-million (U.S.) loan that comes due in 2027. The loan, said Mr. Wall at the time, positioned the company well to refinance the notes, and to help it optimize its operations and costs, and grow the Gahcho Kue mine through new discoveries.
Of course, Mr. Desmond made out well with that transaction as well. He got warrants to buy another 41 million shares at 60.975 U.S. cents apiece, which -- should the company's stock price get high enough to entice him to exercise -- would add another $25-million (U.S.) to Mountain Province's treasury. As well, Mr. Desmond is collecting hefty sums in interest and fees from the loans -- not that Mr. Wall and the company's lesser shareholders have been doing much complaining.
The good news, of course, is that Mountain Province has been doing quite nicely of late, thanks to near-record-high rough diamond prices. The company racked up a profit of nearly $47-million in the first half of the year, handily above the less than $30-million in the same period last year. As for 2020, well, look away now unless you have an affection for horror stories: The company lost nearly $68-million in the first two quarters and another $8-million in the following quarter.