Good news The diamond and specialty minerals stocks box score for Monday was a mediocre 86-84-140 as the TSX Venture Exchange fell one point to 610. Surge Battery Metals Inc. (NILI) was a busy trader, adding 1.5 cents to 24 cents on 1.27 million shares without benefit of news.
Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) lost one cent to 49 cents on 256,000 shares. One would never know it from the company's stock chart, but Mountain Province had arguably its most sparkling year yet, as high diamond prices led to its best annual revenue to date at its 49-per-cent-owned Gahcho Kue mine, 250 kilometres northeast of Yellowknife in the Northwest Territories.
Mountain Province reported sales of $388.9-million last year, a hefty increase over the $298.3-million it managed a year earlier, and it did so with a smaller carat crop. The company's share of the Gahcho Kue diamonds was 2.7 million carats last year, down from 3.05 million in 2021 despite the company managing to mine and process the same amount of kimberlite in both years. Grade was the culprit, as it dropped to 178 carats per hundred tonnes from the 202 carats per hundred tonnes achieved in 2021.
Fewer diamonds but higher revenue highlights the improvement in Mountain Province's average diamond price, which averaged $112 (U.S.) per carat in 2022 compared with just $75 (U.S.) per carat the year before. In fact, while last year marked a record low for carat production at the mine -- a situation exacerbated early in the year by a COVID-19 outbreak and by a major bearing failure in the primary crusher -- the 2022 revenue comfortably topped what the company achieved before the pandemic, back in the first years of mining when the grades handily topped 200 carats per hundred tonnes.
The previous best year came in 2018, the first full year at full production, when Mountain Province's share of production was 3.4 million carats of diamonds at 217 carats per hundred tonnes. Unfortunately, it averaged just $74 (U.S.) per carat, achieving just $311-million in yearly revenue. In fact, the company's sales averaged barely $70 (U.S.) per carat through the start of mining late in 2016 until the pandemic hit in early 2020, a big disappointment from the rosy assumptions at feasibility, when Mountain Province cheered its gems as potentially worth $170 (U.S.) per carat in a mining scenario.
Rough diamond prices have recently curved downward from an all-time high set early in 2022, but Mountain Province's revenue has been more resilient than some of its rivals. This is apparently an artefact of its range of goods: Reid Mackie, vice-president of diamond marketing said that they are "seeing continued upward price performance in the small, cheap and brown coloured diamonds" -- diamonds in which Gahcho Kue produces in abundance. This sustained increase in price for cheaper goods is a "welcome surprise," he added, although in hindsight, he says it could have been expected, given the absence of Argyle diamonds and the increased sanctions against the Russians.
As for what lies ahead, Mountain Province predicts this year will be perhaps better than 2022, although one should hold on to their hat, as turbulent times are predicted for 2024. This year, Gahcho Kue is predicted to do slightly better than in 2022, with the company expecting its share of production to lie between 2.75 million and three million carats, roughly 175 carats per hundred tonnes.
The problem comes the following year. Although Mountain Province and its majority co-venturer, De Beers Canada, have managed to add some carats to their mine plan for 2024, the current guidance calls for Mountain Province's share of production to fall between 1.96 million and 2.15 million carats. That portends a lean year, although a better one than laid out in the now one-year-old prediction, which called for barely 1.6 million carats.
The partners are still looking to optimize -- smooth out, essentially -- the mine plan, in the hope of further boosting the gloomy 2024 forecast, but the problem is the shift to mining at Tuzo, which grades barely 80 carats per hundred tonnes in the upper part, a result of significant rock dilution. The good news is that once the company and its shareholders weather that storm, the next few years look much better, as higher-grade kimberlite reaches the Gahcho Kue plant from deeper within Tuzo and a revitalized 5034.