Purcell Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD) gained 1.5 cents to 46 cents on 309,000 shares. The company had a decent first quarter mining diamonds at its Gahcho Kue mine in the Northwest Territories, although when it gets around to rolling out its financial results, investors had best expect some red ink, thanks to the uncertainties and shutdowns triggered by government attempts to slow the COVID-19 pandemic.
Mr. Brown, president and chief executive officer, says that Mountain Province and its majority co-venturer, De Beers Canada, mined 1.03 million tonnes of kimberlite in the first three months of 2020 and processed 902,000 tonnes of the rock, recovering 1.66 million carats or 1.83 carats per tonne. A year earlier, they mined just 605,000 tonnes but processed 870,000 tonnes, aided by a stockpile, and the 1.58 million carats recovered worked out to a grade of 1.82 carats per tonne.
Mr. Brown said that the production data were in line with expectations -- the old expectations that is, not the worrisome new ones where anything can be expected, especially if it is bad. Mr. Brown pointed to the slight increase in carats recovered and the more energetic mining rate as key improvements. He was also buoyed by the sales data, in which Mountain Province sold nearly 660,000 carats for just under $50-million, an average of $75 (U.S.) per carat. That was up from the $71 (U.S.) per carat that the company achieved a year ago, when it sold just under 644,000 carats for nearly $46-million (U.S.).
The good news is that mining continues at Gahcho Kue, for now at least, although the COVID-induced procedures both in staffing the mine and in how the crews work cannot be as efficient as before. Further, there is always the risk of a full shutdown, however temporary, should either the partners or the government deem it necessary. The bad news, of course, is that the diamonds produced at Gahcho Kue cannot be sold for now, which leaves Mountain Province looking at a looming cash flow crunch.
Mr. Brown says that Mountain Province has already drawn down $25-million (U.S.) from the revolving credit facility that it renegotiated a few weeks ago. (The $50-million (U.S.) facility shrinks to $25-million (U.S.) should the company's maximum total leverage exceed 4.5-to-1 during the current quarter, so the facility may already be fully drawn.)
Mr. Brown says that he and his crew will be revising the company's 2020 production guidance, adding that they are currently working through various planning scenarios to fully assess the impact on production. He says that the company will reveal its new guidance to the market "when we have more clarity and certainty on what the future may look like."
While there clearly is no certainty about what the revised guidance may offer, there is some clarity on what the future looks like: It looks ominous, given that the shutdown has wreaked havoc on the diamond market. Worse, when the miners and diamantaires get back to producing and selling rough, there is no certainty that the manufacturers and buyers will be there to polish and purchase the goods for some time. Fortunately, diamond values aside, Gahcho Kue continues to impress with its grades and production rates.