from stockwatch 2022-04-19 17:43 ET - Market Summary
by Will Purcell
Dermot Desmond's Mountain Province Diamonds Inc. (MPVD) lost two cents to 82 cents on 241,000 shares. The company had an up-and-down first quarter mining diamonds at its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories. Up was the amount of kimberlite mined and processed, down was the carat count -- but the best rough diamond prices by far since mining began six years ago rescued the company's revenue tally. As a result, the company's accountants are presumably smiling for a change, as they work to close the books on a strong first quarter.
Gahcho Kue processed just over 707,500 tonnes of kimberlite in the first quarter, up from 625,500 tonnes a year earlier, but remember that the 2021 result had been limited by a three-week shutdown to deal with a COVID-19 outbreak. The key number -- diamond production -- was barely 1.18 million carats in the first three months of 2022, down from 1.39 million a year earlier despite that COVID-shortened period. Fortunately, Mountain Province says that it sold its diamonds for $132 (U.S.) per carat, compared with just $71 (U.S.) per carat a year ago.
The big negative was the first quarter grade, which was just 1.68 carats per tonne, down a full 25 per cent from the 2.23 carats per tonne achieved a year ago. Mountain Province managed to find a positive spin for this, in part, noting that the miners ran into an area initially thought to be waste that proved to be diamond-bearing although at a lower grade. Exacerbating the grade situation, the miners also encountered more barren rock dilution than expected, cutting the production grade further.
"Initiatives are under way to correct this going forward," says Mark Wall, president and chief executive officer, a statement that suggests the dilution was a continuing problem as Gahcho Kue lurched forward into the second quarter. On the other hand, Mr. Wall cheers the "discovery of incremental, previously unmodelled kimberlite ore as a positive for the operation," a positive that reflects the significant opportunities for additional diamonds to be discovered at Gahcho Kue.
Mr. Wall enthused forward at promotional warp speed, mentioning two other first-quarter problems that had apparently hampered production. He was pleased to say that the operational effects of the late-2021-early-2022 Omicron outbreak at the mine "are now largely behind us." (In other words, not quite.) Mountain Province first mentioned the outbreak in late December, stating that "no material impact to production" was expected, but three months later, the company conceded that the outbreak had "impacted annual production and costs."
Also having an impact was the failure of the pitman bearing in the primary crusher, but the equipment has now been repaired, Mr. Wall says. The breakdown apparently led to the identification of other equipment challenges, as Mr. Wall said that "additional crusher optimization opportunities" -- promoterese for problems -- had been identified. After a slower-than-expected first quarter, Mr. Wall concludes, "we are working ... to make the necessary improvements."
As for the lower-grade but unexpectedly additional kimberlite, Mountain Province calls it a "positive development for the mine, although a short-term constraint." This rock is not part of the resource estimate, but it will be included into the mine's stockpile strategy throughout 2022. The net effect will be a lower processed grade now but a net increase in life-of-mine ore tonnes, so accordingly it is "seen as a positive." How much of a positive is unclear, but it is worth noting that Gahcho Kue mined just over 300,000 additional tonnes of kimberlite than it processed in the first quarter, unlike a year ago when it processed more rock than it mined.
Mr. Wall was ebullient about the find -- a "positive for the operation" he cheers yet again for full effect -- and he adds that it reflects the significant opportunities for additional diamonds to be discovered at the Gahcho Kue mine. He has a point, as the company and De Beers Canada, its majority co-venturer at the mine, encountered other areas with unexpected kimberlite on occasion over the past several years as mining of the 5034 pipe progressed.