Purcell The diamond and specialty minerals stocks box score on Wednesday was a mediocre 70-79-151 as the TSX Venture Exchange fell one point to 696 and polished diamond prices nosed downward. Trent Mell's First Cobalt Corp. (FCC) lost one-half cent to 12 cents on 1.46 million shares. The company is inching along with its plan to operate a cobalt refinery in Northeastern Ontario. It cheered rosy economic projections a while ago, and late last month it found improved environmental impacts to applaud.
Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD) gained two cents to 40.5 cents on 12,000 shares. Mountain Province rose 3.5 cents Tuesday on word -- a pleasant surprise -- that it had concluded its largest open-market sale to date. The tender was a "record in both volume and value terms," according to Mr. Brown, president and chief executive officer. Mountain Province sold nearly 560,000 carats mined at its Gahcho Kue mine for $34.3-million (U.S.) in the Antwerp-based sale. Those are the volume and value records; the average price of $61 (U.S.) per carat, while considerably better than the company's September sale, was certainly no record.
In that September sale, its first tender in the post-COVID world, Mountain Province sold just over 210,000 carats for $8.9-million (U.S.), averaging just $42 (U.S.) per carat. Buoyed by the higher average price of the latest sale, Mr. Brown cheered the "outstanding result" and lauded the "continued recovery in diamond prices across categories" as being positive for the company and the industry in general. This positive momentum, he concluded, is building as the industry enters the all-important traditional retail season.
Adding to the new price encouragement, Mountain Province had also sold about $50-million (U.S.) of rough during the summer to its largest shareholder, Mr. Desmond and his Dunebridge Worldwide Ltd. Dunebridge paid an average of just $33 (U.S.) per carat for over 680,000 carats in the first sale, and presumably not much more than that for the following parcels of diamonds provided by Mountain Province.
Despite the current optimism, there is a devil lurking in the details. The diamonds that Mountain Province sold to Mr. Desmond's company did not include any gems larger than 10.8 carats and the proportion of quality stones was smaller than normal, as the company had rushed many of those stones to market before Antwerp hunkered down into lockup in March. Further, in its September Antwerp sale, Mountain Province said that the tender did not include any high-value fancy gems or any of the plus-10.8-carat specials.
That caveat was conspicuously absent with the latest sale, so Mountain Province presumably sent some portion of its 10.8-carat gems and high-quality stones to market. It is unclear if the 560,000 carats sold represented a true run-of-mine sample of the Gahcho Kue diamonds. Indeed, while it is possible that the company continued to withhold some of its best gems, it is equally plausible that it also sent a backlog of the best gems to market along with those recently mined.
The good news either way is that the Antwerp-based buyers were willing to purchase a record number of gems, which, COVID willing, could bode well for the last sale of 2019, scheduled to take place from the end of November to mid-December. Further, should Belgium slip back into lockdown, Mountain Province does have Mr. Desmond to rely upon, as it and Dunebridge recently expanded their arrangement to cover an extra $50-million (U.S.) of rough diamonds.
The new sales and higher prices should help keep the wolf from Mountain Province's door, but they will not on their own get the company out of what it describes as "serious financial difficulty." Mountain Province had gotten into trouble before the COVID woes began, as its rough diamond sales averaged just $70 (U.S.) per carat over the previous two years. Nevertheless, the improving market is a glimmer of light at the end of the tunnel.
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