will purcell Shareholders of Dermot Desmond and David Whittle's Mountain Province Diamonds Inc. (MPVD), which gained seven cents to $3.31 on 111,000 shares, are looking beyond a so-so first quarter to the short-term prospect of a first dividend and the longer-term prospect of a tweaked arrangement with De Beers Canada, its co-venturer at the Gahcho Kue mine in the Northwest Territories. Both prospects could bode well for the company's share price, if the coming results meet the market's (often inflated) desires.
Mountain Province managed a first quarter profit of only $67,000, in part because it held just two rough diamond sales during the period. Even so, its operating income from the mine for the first three months of 2018 was a healthy $20-million. (Nearly half of that went poof when the company paid the interest on its debt; the other half disappeared through accounting for foreign exchange losses.)
Perry Ing, Mountain Province's chief financial officer, says that with cash operating expenses remaining well in hand through the frigid Arctic winter, the company should continue to report strong earnings from mine operations in the second quarter. (Mountain Province has already completed its first of three rough diamond sales this quarter. A second is currently under way and a third is scheduled for mid-June.)
Mr. Whittle, interim president and chief executive officer, says that the company will "announce and set a dividend" based on its second quarter. He says that the announcing and setting would occur in the company's discussion of the quarterly result, which should occur in mid-August. Meanwhile, Mr. Whittle says that the first payout -- "the actual cash in your pocket" -- will come after the next quarterly results are in hand, presumably late in summer or early fall, if all goes to plan. Mr. Whittle reminds investors that the dividend payment will be governed by the company's commitments to its lenders, which include a capacity build-up rate of one-half of adjusted reported net income. (One bit of good news: One of the adjustments will be the exclusion of unrealized foreign exchange gains and losses, which consumed over $10-million of the company's first quarter income.)
Mountain Province's shareholders will have to share those future dividends with those who arrived through the company's recent reacquisition of its 2012 spin-off sister, Kennady Diamonds Inc. Kennady's shareholders now own nearly one-quarter of Mountain Province's stock, so the per-share dividend will be down about 25 per cent from what it otherwise would have been. Mr. Whittle and his crew are anticipating a longer-term payback, of course, when the Gahcho Kue plant starts processing kimberlite from Kennady's Kelvin and Faraday kimberlites around 2023. Those pipes hold perhaps 20 million carats if one counts -- and one really should not -- all the current resources and the potential carats in targets for further exploration.
The carat counting can come later, after further exploration, as Mr. Whittle says that his company needs to incorporate the Kennady pipes into the Gahcho Kue joint venture through a deal that would have De Beers acquire a 51-per-cent interest in the Kennady project. That arrangement, he says, will come during the next year or two, adding that while it is "not a next month thing," he and his crew will be pushing the plan forward. (The pushing will apparently be led by others: Mr. Whittle will return to his role of independent director shortly, once the company picks a new CEO.)