| The average price is an improvement over the October sale, in which Mountain Province averaged $60 (U.S.) per carat, or a normalized $63 (U.S.) per carat. Mr. Whittle, interim president and chief executive officer since Patrick Evans was sent packing by "mutual decision" in June, called the pricing of the November sale "stable to firm" -- a term that would be encouraging if the pricing had not stabilized and firmed at barely half of the $139-(U.S.)-per-carat value laid out in a 2014 feasibility study. Mr. Whittle says that the modest gain in price over October is the result of an improved quality distribution among the larger diamonds, and increased demand for the lower value assortments. The disappointing prices might potentially be disastrous for Mountain Province were Gahcho Kue not handily beating its grade estimates. The feasibility study suggested that the 5034 pipe, which is currently being mined, would average about 1.76 carats per tonne this year, but it has averaged 2.11 carats per tonne so far. Further, the grade has been increasing as the diamond prices decline: From August through October, the mine has produced 1.79 million carats from 773,000 tonnes of kimberlite, about 2.31 carats per tonne. (While the co-venturers predict that the grade will decline somewhat, it is still going the other way: In October, the mine averaged 2.40 carats per tonne.) The significantly higher grade partially eases the pain of the much lower prices. The 2014 feasibility study projected Gahcho Kue would generate about $800-million (U.S.) in revenue from 5.3 million carats, or about $150 (U.S.) per carat. (The study, like its peers, optimistically assumed rough prices would escalate by 1.5 per cent per year above inflation.) Assuming the mine averages three million tonnes per year, a grade of 2.3 carats per tonne and a rough price of $70 (U.S.) per carat would support annual revenue of just under $500-million (U.S.) per year. (Fortunately, the weaker Canadian dollar boosts the revenue in Canadian currency to about $650-million, about 80 per cent of the feasibility estimate.) The good news is that Gahcho Kue has been keeping costs within projections and that it is generating income for Mountain Province, including a $20.6-million operating income during the third quarter. If it can keep that up, the company can keep paying its debt charges and put cash away for a rainy day, but mines in Canada's North frequently struggle to maintain summer production rates through a long, harsh winter. Curiously, Gahcho Kue's three-month processing rate peaked at the end of July at 879,000 tonnes; at the end of October, it had declined to 773,000 tonnes. |