from stockwatch
Diamond & Specialty Minerals Summary for March 17, 2020
2020-03-17 14:38 PT - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Tuesday was a positive 81-64-155 as the TSX Venture Exchange regained eight points to 374. Rough diamond prices had another rough week, dropping another full percentage point according to Paul Zimnisky's global rough diamond price index. The index showed signs of recovery in January, bouncing back about 2 per cent from a mid-November low, but the pandemic panic has people hoarding everything but diamonds. As a result, rough prices are down 5 per cent in the past two months.
Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD) lost five cents to 55 cents on 62,000 shares. The stock slumped as low as 54 cents today, another multidecadal low and far below the 73 cents at which it bottomed in the 2009 Great Recession. The last time it was lower was in the dark days of 2001, immediately after 9-11 and at a time when there was much concern about whether Gahcho Kue would be economic. It proved to be, and Mountain Province's stock got as high as $7.18 in the fall of 2016, just after the mine held its ribbon-cutting ceremony.
While Gahcho Kue's diamond values are well short of the original projections, the mine continues to do well operationally. Unfortunately, the company's shareholders will have to wait another week to find out how well their company performed last year, as Mr. Brown, president and chief executive officer, says that Mountain Province's 2019 financials have been delayed as its auditors contend with coronavirus-induced travel delays and self-isolation requirements.
Fortunately, the delayed report is unlikely to show any impact from the latest slump in rough diamond prices, as the rough market in the final quarter of 2019 was stable at first, with prices inching higher in December, allowing the opportunity for a hint of good news on the sales front. Further, Gahcho Kue has been doing well on the mining end, with 2019 production at 6.82 million carats, nearly matching the 6.94 million carats produced in 2018. While production was down slightly, that was primarily the result of the mine moving to a larger minimum cut-off, which saw the smallest diamonds lost as waste, but which resulted in lower operating costs that more than made up the difference.
Through the first nine months of 2019, Mountain Province's 49-per-cent share of Gahcho Kue resulted in revenue of $159-million (U.S.) from the sale of 2.5 million carats, an average of $63 (U.S.) per carat. The company's fourth-quarter sales are expected to bring the full year's tally to $208-million (U.S.) in revenue from the sale of 3.3 million carats, or about $63 (U.S.) per carat.
While there are unlikely to be any surprises next week when Mountain Province rolls out its audited results, investors had best gird for a tough first quarter of 2020. The company presumably did about as well in the first two sales of 2020 as it did in the last one of 2019 -- a bit better than the sales of late summer and early fall in other words -- but its latest tender of rough diamonds, currently under way, is coming at a bad time. One need only look to Alrosa and De Beers, major rough diamond producers not known for their benevolence: Both companies are currently being very compliant when dealing with their cash-strapped customers.