from stockwatch 2024-01-29 15:59 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Monday was a weak 76-90-144 as the TSX Venture Exchange rose three points to 554. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) lost one-half cent to 25 cents on 82,000 shares.
Mountain Province had a solid year mining diamonds at its 49-per-cent-owned Gahcho Kue diamond mine in the Northwest Territories. The company and its majority co-venturer, De Beers Canada, produced 5.56 million carats in 2023, up slightly from the 5.52 million carats it managed a year earlier. Unfortunately, Mountain Province did not do as well with its sales. The company sold its 2023 production for an average of $90 (U.S.) per carat, down from the $112 (U.S.) per carat that it managed in 2022.
The slumping revenues are a concern because rough diamond prices fell relentlessly through 2023 and are off to a bleak start in 2024. While it is not yet known how Mountain Province did with its first sale of the year, its fourth quarter sales were bleak affairs in which the company averaged just $60 (U.S.) per carat. That low value was partly the result of the company also selling the lesser gems that it had held back though the spring and summer when it was hoping for a price rebound that never came. It would therefore be reasonable to expect the company averaged roughly $75 (U.S.) per carat with its normal suite of goods.
Looking ahead, the currently weak average price for rough diamonds is a backstory to a major concern for 2024. That big issue is an expected significant drop in diamond production this year. Two years ago, De Beers and Mountain Province warned the market that 2024 would be a tough year as Gahcho Kue shifted its focus toward mining the Tuzo pipe, while mining at 5034 would temporarily halt for a big pit expansion program.
And so, while the 2022 mine plan predicted Gahcho Kue would yield 6.1 million carats in 2023, it forecast that the mine would produce just 3.3 million carats for 2024. The dramatic reduction is the result of lower grades: While the processing plant was projected to steadily handle 3.6 million tonnes of kimberlite per year through the 2020s, the heavy reliance on kimberlite from the top of Tuzo cut the projected grade this year to 91 carats per hundred tonnes from about 169 carats per hundred tonnes.
There has been a glimmer of good news since then, as De Beers and Mountain Province beaver away on optimizing the mine plan. Late last year the co-venturers cheered that "some additional carats have come into the plan" for 2024, although the aggregate quantity of diamonds across the life of the mine "is not materially different." In other words, they have smoothed out the production profile somewhat, perhaps shifting some of the 2023 production into this year, but more importantly, advancing some of the 2025 production into this year's plan.
Indeed, the 2022 mine plan called for the NEX pit expansion at 5034 to be complete and so nearly all the 3.6 million tonnes of kimberlite being processed in 2025 was to come from 5034 and the northeast extension area. That rock is expected to grade about 212 carats per hundred tonnes -- enough to boost the annual carat crop to 7.1 million carats.
Even so, the guidance offered last fall for 2024 called for Gahcho Kue to produce between four million and 4.4 million carats, up only part way from the 3.3 million initially projected. Mr. Wall, Mountain Province's president and chief executive officer, says that his company and De Beers will continue to review both 2024 and the rest of the mine plan to "seek further optimization and improvement." God speed, mine planners and diamond sellers, but investors should brace for a potentially tough -- although hopefully brief -- stretch this year.