from will purcell
Patrick Evans's Mountain Province Diamonds Inc. (MPV), down nine cents to $5.34 on 54,000 shares, will need over $500-million to cover cash calls, most of them expected within the next year, as De Beers Canada pressed ahead with construction of the $1-billion Gahcho Kue diamond mine, 250 kilometres northeast of Yellowknife. Mr. Evans seems up to the task: Mountain Province had $40-million in working capital at the end of June and it should close a $100-million equity sale soon. Further, Mr. Evans expects the final documents and approvals for $370-million in bank loans before the end of the year. Having De Beers as a partner was once a liability, according to many of Mountain Province's retail shareholders and perhaps Mr. Evans once thought so as well. He became CEO in 2007 and spent his first year prodding his foot-dragging partner for signs of life. De Beers is now a huge asset, as Mr. Evans's bankers will undoubtedly be pleased the international diamond company is a majority partner at Gahcho Kue. Mr. Evans's shareholders are also feeling secure, thanks to a few high-value diamonds recovered in bulk sampling over the past decade. Those diamonds, a 25-carat gem from Tuzo and a 10-carat rock from AK-5034, dramatically boosted the appraised values of parcels containing thousands of carats. Mountain Province's consultants, WWW International Diamond Consultants, think luck played a role in those finds, so their modelled values are appreciably lower than the current appraised value at Gahcho Kue of $182 (U.S.) per carat. Their estimates range from $142 (U.S.) per carat in the northeastern lobe of 5034 to $101 (U.S.) per carat at Tuzo, and average $118 (U.S.) per carat across the three Gahcho Kue pipes. These are base-case values; the high is near $160 (U.S.) per carat and the minimum is just under $110 (U.S.) per carat. Mr. Evans points out the words "high" and "minimum" were chosen deliberately. While WWW thinks that the high estimate could be exceeded in an operating mine, it "believes it is highly unlikely" that the average production prices would fall below the minimum modelled value. (One had best be careful in expressing that opinion around the former shareholders of Tahera Diamond Corp. Tahera went under in 2008 in large part because the diamond revenues at its Jericho mine were far below the rosy projections.) Nevertheless, Mr. Evans has a seemingly endless line of backers who believe Gahcho Kue will beat its feasibility projections.