from stockwatchWill Purcel
Dermot Desmond and David Whittle's Mountain Province Diamonds Inc. (MPVD), up 16 cents to $3.16 on 2.72 million shares, has wrapped up its third rough diamond sale of 2018. The company sold 451,000 carats for $26.4-million (U.S.), about $58.50 (U.S.) per carat. That was discouraging at first glance, but Mr. Whittle, interim president and chief executive officer, and Reid Mackie, vice-president of diamond marketing, were quick to remind investors that this was expected -- and pointed out to the market a month ago.
In March, the company had sold 177,000 carats for $25.1-million (U.S.) per carat. That hefty average, $142 (U.S.) per carat, had been skewed much higher because the sale included many fancy and special diamonds that normally would have been sold in April. Mountain Province, which regularly "normalizes" its sales data to smooth out the nugget effect of the erratic sales of valuable gems, pegged the normalized value of the diamonds sold in April at $80 (U.S.) per carat, matching the normalized average for March. (In February, Mountain Province's normalized average diamond value was $85 (U.S.) per carat.)
Mr. Mackie called the result of the April sale a "solid outcome," adding that he was pleased to see high demand levels maintained at the company's tenders and the "underpinning of price gains" achieved at sales during the past quarter. ("Underpinning" should not be confused with "continuing." Mr. Mackie says that prices for larger, better-quality diamonds were "stable to firmer" -- flat, in other words -- while prices for smaller, lower-quality goods "softened slightly" -- or, in simpler terms, "dropped.")
Mr. Whittle, who replaced Patrick Evans in the corner office last June, also chimed in. He was "very pleased" with the results, one-upping the enthusiasm of Mr. Mackie, noting that the sales data "exceeded our expectations." (If they did, only Mr. Whittle and his crew would know: Mountain Province has yet to reveal its 2018 sales guidance. Last year, the company predicted its average prices would fall between $70 (U.S.) and $90 (U.S.) per carat. The company barely squeaked over its lower hurdle last year, averaging $70 (U.S.) per carat.)
Mountain Province should have its first quarter production data next week, and the average grade of Gahcho Kue for March will be a key number. In a 2014 feasibility study, the company estimated the 5034 pipe, which is currently being mined, at about 1.65 carats per tonne. Gahcho Kue had been doing considerably better than that, with the grade rising steadily last year, reaching 2.42 carats per tonne during December. The grade dropped abruptly in January, to 1.89 carats per tonne, and it came in at 2.05 carats per tonne during February. The average headed into March was 1.95 carats per tonne, less than the company's operational plan guidance for 2018, which ranges from 2.02 to 2.12 carats per tonne.
As a result, Mountain Province's attributed value for January, its last complete month, was $167 per tonne mined, its lowest result since July when the company averaged $160 per tonne. Fortunately, the Gahcho Kue operational plan calls for cash costs of production to average just under $100 per tonne this year, so there appears to be plenty of room left for the dividends that the company suggests could start later this year.