from stockwatch 2021-09-29 17:42 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Wednesday was a weak 73-113-114 as the TSX Venture Exchange shed 11 points to 856 and polished diamond prices edged higher.
Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD) lost 2.5 cents to 42.5 cents on 216,000 shares. The company has wrapped up its final diamond sale of the third quarter, bringing its quarterly haul to 1.03 million carats worth $74.1-million (U.S.), or $72 (U.S.) per carat. Mr. Brown, president and chief executive officer, was "extremely pleased to see the strong price increases achieved at sales in the first half of 2021 continue into the third quarter."
Mr. Brown is clearly a glass-half-full promoter as the full year-to-date sales show that Mountain Province has now sold 2.35 million carats for $169.4-million (U.S.), also about $72 (U.S.) per carat. That qualifies as continuation, certainly, but the company's diamonds did not gain any advantage through the summer quarter from a final spurt in rough prices, which finally leveled off in mid-August, after a torrid increase through the last half of 2020 and the seven months of 2021.
Indeed, Mountain Province's rough diamond sales are in line with what the company achieved in the first three full years of mining at Gahcho Kue, before the COVID-19 pandemic brutalized the sector in 2020. In 2017, the company averaged $68 (U.S.) per carat for its 49-per-cent share of the Gahcho Kue diamonds, and the following year it managed $74 (U.S.) per carat. That step forward was followed by two steps rearward; in 2019, Mountain Province sold its gems for a bleak $63 (U.S.) per carat.
Those averages were discouraging to Mountain Province's long-time shareholders who had been told to expect prices nearly double those values, and who -- at least those who oohed and aahed over the spiffy presentations that former CEO Patrick Evans had rolled out during the early 2010s -- had been encouraged to think that prices could reach $170 (U.S.) per carat off the hop and grow significantly thereafter. Unfortunately, those shareholders who stuck around to reap the predicted rewards of production have experienced things differently.
No matter how discouraging those numbers might be to shareholders, they are a welcome ray of sunshine compared with the bleak $51 (U.S.) per carat that Mountain Province managed in 2020, thanks to the ravages of the pandemic. Indeed, that the company was able to sell any diamonds at all through the spring and summer was mainly credit to Mr. Desmond, the company's major shareholder, who bought $50-million (U.S.) of then unsellable rough for about $33 (U.S.) per carat. Then, when he was able to sell the gems for a profit, he gave the company a cut of the gains.
The good news is that Gahcho Kue is again generating cash, enough that Mountain Province has now fully repaid a $31-million (U.S.) term loan that the company took out from Mr. Desmond's Dunebridge Worldwide Ltd. to tide it over until the end of the year. The company paid down a first chunk -- more than it had to -- in July, and now it has repaid the final $11.5-million (U.S.) ahead of time. (While Mr. Brown, his crew, and his lesser shareholders are undoubtedly grateful to Mr. Desmond, they did pay dearly: Dunebridge got a flat 5-per-cent fee, about $1.55-million (U.S.) for the loan, plus 10-per-cent annual interest.)
With what retail shareholders might liken to paying off a maxed-out credit card debt now taken care of, Mr. Brown and his crew then got an extension of the $25-million (U.S.) revolving credit facility, also held by Mr. Desmond's Dunebridge, until the end of next March. (Mr. Desmond is managing to collect in fees what he has been unable to reap through the market: Dunebridge gets a 2-per-cent fee for the extension.) The arrangement got the support of the company's board, who still deem Mountain Province to be "in serious financial difficulty" -- fortunately, not quite as seriously as before.