from stockwatch 020-05-08 17:36 PT - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Friday was a so-so 79-75-147 as the TSX Venture Exchange rose three points to 492. Rough diamond prices inched higher last week, according to diamantaire Paul Zimnisky's global rough diamond price index. While that index is up perhaps 1 per cent from its nadir one month ago, it is off over 10 per cent in the past three months and down 20 per cent since the spring of 2015.
Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD) slumped 6.5 cents to 38 cents on 876,000 shares despite a solid first quarter at the Gahcho Kue mine in the Northwest Territories, the largely economic ravages of the COVID-19 pandemic notwithstanding. While the company did report a $40-million loss in the quarter, over $30-million of that was the result of a shrinking Canadian dollar. The company had nearly $380-million in debt at the end of 2019, but that ballooned to over $410-million as it is denominated in U.S. dollars.
The good news, of course, is that Mountain Province did not actually shell out the $30-million, nor will it have to, unless the Canadian dollar remains depressed over the life of the secured notes. Further, even if the Canadian dollar remains in its oil-induced funk, Mountain Province sells its diamonds in U.S. dollars, so its revenue when expressed in Canadian dollars, could grow -- once the company can resume its sales, that is.
Mr. Brown, president and chief executive officer, says that he and his crew are "awaiting more clarity" on recent news regarding the easing of government restrictions in Belgium, Dubai and India, which would allow the diamond trade to get rolling again. He cheers word that the easing has started in Belgium, where Mountain Province holds its sales, and in India, where much of its production ends up. Better yet, he is buoyed by customer enquiries, which suggest jewellery makers are eager to get back to work.
Mr. Brown says that his company and its majority partner, De Beers Canada, have been taking advantage of Canadian government wage subsidies and other programs to help with their growing short-term debt, as COVID inefficiencies hurt their bottom lines. Fortunately, in a sector flattened by dried-up demand, shuttered mines and work-at-home exploration programs, Mountain Province and De Beers have fared better than most. Still, the uncertainties and weaker cash flows have Mr. Brown in close contact with Mountain Province's lenders.
Mountain Province withdrew all its 2020 production guidance in mid-March as a result of the pandemic, which forced the company to cancel its third rough diamond sale of the year and which threatened to force closure of the Gahcho Kue mine. Fortunately, Mr. Brown is seeing a light at the end of the tunnel: He says that Mountain Province is in the final stages of completing its revised guidance, which he expects to reveal in June.