from stockwatch 2020-05-15 17:36 PT - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Friday was a terrific 102-44-155 as the TSX Venture Exchange rose 10 points to 509. Rough diamond prices may have bottomed, according to diamantaire Paul Zimnisky's global rough diamond price index, which added 0.37 per cent last week and is now up 1.3 per cent in the past five weeks. It has a long way to go, however, as the index is down nearly 15 per cent in the past year, down over 20 per cent in the past five years, and about 30 per cent below its 2011 high.
The $550-million (U.S.) in bonds issued by Montana billionaire Dennis Washington's private Northwest Acquisitions ULC have hit the floor. The $100 (U.S.) bonds, issued in 2017 to cover part of the cost of the $1.5-billion takeover of Dominion Diamond Corp., currently trade for just $1.44 (U.S.), pegging their current value at less than $8-million (U.S.). Dominion is currently in bankruptcy protection because of COVID-19 shutdowns, but its shrinking bond price through 2019 -- they fell from near $100 (U.S) to a low of $46 (U.S.) last year -- portended earlier troubles.
Those troubles arise from what investors see as Dominion's increasing inability to repay the bonds when they come due late in 2022. By then, Dominion's 40-per-cent-owned Diavik mine will be in the last few years of its life, with diamond production ramping steadily lower barring any new discoveries. While its 90-per-cent-owned Ekati mine could last into the 2040s if all its additional deposits are brought online, that will take some major capital expenditures -- over $600-million (U.S.) for the big Jay pipe alone.
Mr. Washington is not the only fond-of-diamonds billionaire to be under water with his investment. Dermot Desmond, an Irish billionaire now living in Switzerland, has been supporting his investment in Mountain Province Diamonds Inc. (MPVD) with a steady stream of market buys this year through his Vertigol Unlimited Co. Mountain Province, which traded as high as $7.18 in the fall of 2016, dipped to a new millennium low of 28.5 cents a month ago and the steady slide has Mr. Desmond in a buying mood.
Since mid-February, Mr. Desmond has purchased 4.82 million shares for nearly $4.3-million, an average of nearly 90 cents per share. The 118 buys brought Vertigol's total position in Mountain Province to just over 68 million shares, nearly one-third of the total outstanding. Indeed, Mr. Desmond invested well over $100-million into Mountain Province over the years and at one point his investment in the company was worth over $300-million. Mountain Province closed unchanged at 34 cents on 657,000 shares today, valuing his diamond holding at less than $24-million.
While Mountain Province has had to go cap in hand to its bankers for relaxations to covenants covering the nearly $500-million in debt incurred to cover the company's share of building the billion-dollar Gahcho Kue mine, that operation is fortunately still operating and generating cash flow -- or at least it will be once the company can resume its regular rough diamond sales.
More talks are under way, says Mountain Province president and chief executive officer, Stuart Brown. He and his crew are "in advanced discussions" with their lenders, as well as the federal government and all interested parties as the company looks to either amend existing credit facilities, or perhaps secure new facilities so that it can cover its continuing operational expenses.