Purcell on MPVD Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD) lost one cent to $1.18 on 204,000 shares. The company revealed its 2019 production and sales results after the close Thursday, ending a great year mining diamonds at its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories -- but a not-so-good year selling those gems.
Gahcho Kue produced 6.82 million carats last year from 3.58 million tonnes of processed kimberlite, an average of 1.9 carats per tonne. The carat crop is slightly lower than the 6.94 million carats pulled in during 2018, but that is largely the result of the mine adopting a larger cut-off screen size during the year. The effect cut the grade by about 10 per cent, from the 2018 average of 2.17 carats per tonne, but the lost diamonds would have little value and the reduced operating costs would more than compensate for the loss.
The processing plant also handled more material as a result of the larger cut-off and other optimizations, running at an average of 10,000 tonnes per day last year. Mr. Brown, president and chief executive officer, summed up 2019 as an "exceptional year of production," with the company "achieving all its operational metrics."
Unfortunately, the company's sales crew were not operating on the same rosy metric system. Mountain Province sold 3.28 million carats for $276.3-million, just $63 (U.S.) per carat. In 2018, the company sold 3.25 million carats for $311-million, an average of $74 (U.S.) per carat. Since the larger cut-off would arguably result in a 5-to-10-per-cent increase in the average diamond price, the 15-per-cent drop in the average diamond price was particularly disappointing.
Mr. Brown said that the diamond market was "somewhat difficult" -- "horrendous" being a promotionally unwise, if not more accurate description. Still, he is armed with good cheer. Mr. Brown says that his "medium-to-long-term outlook for rough diamonds remains positive," and while that suggests he is writing off 2020 already, that is not the case, at least not yet: "Positive signs started to emerge late in 2019 and strengthened early in 2020," he beamed, noting that luxury retailers are reporting stronger than expected holiday season sales. Mr. Brown is hopeful that the upward trend he sees in the data will bolster Mountain Province's first sale of 2020.
Gahcho Kue's grades have surpassed the numbers laid out in Mountain Province's 2014 feasibility study, topping the projected grade at the flagship 5034 pipe by about 20 per cent, if not more. Unfortunately, the diamond value has gone the other way by a wider margin. The feasibility study valued the 5034 diamonds at about $140 (U.S.) per carat, but the mine has struggled to keep average prices at half that figure since mining began in the fall of 2016. As a result, Mountain Province had to restructure its debt a few years ago and its little four-cent quarterly dividend that appeared in the second quarter of 2018 turned out to be a one-time event.
Still, Mountain Province's fate has been far rosier than what befell its rival, Stornoway Diamond Corp., which slid into bankruptcy last year after its Renard mine in Quebec faced the same revenue problems but could not make up the shortfall with increased production.