Rough Prices Related Story: MPVD - Review by Will PurcellMountain Province has had its best first quarter ever at Gahcho Kue. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) bucked the trend gaining one cent to 78 cents on 859,000 shares.
Mountain Province's stock had jumped higher Wednesday, adding six cents to 77 cents on 516,000 shares following word of its first quarter financial results. The company had a solid quarter, earning $24.2-million, compared with the $7.3-million it earned a year ago. (The company reported a whopping $237.6-million profit in the last quarter of 2021, but that was the result of a $240.6-million impairment reversal without which the company would have reported a $3-million net loss.)
The turnaround over the past year was significant, especially since Mountain Province's 49-per-cent share of the diamonds mined at Gahcho Kue, 250 kilometres northeast of Yellowknife, dropped to 507,000 carats from 603,000 carats a year ago. The drop in carats sold in the first three months of 2022 was the result of an Omicron outbreak at the mine early on, and the failure of a bearing in the primary crusher, which cut production by about 15 per cent.
The good news was that soaring rough diamond prices peaked during the quarter, allowing Mountain Province to average an impressive $132 (U.S.) per carat during the first three months of 2022, up from the $71 (U.S.) per carat it managed a year earlier and the roughly $70 (U.S.) per carat that its Gahcho Kue sales had averaged since production began in the fall of 2016.
In fact, the average is within hailing distance of the $140-(U.S.)-per-carat forecast that the company cheered in its final feasibility study. Mind you, the forecast also included an escalator that tacked on increases beyond the effects of inflation, leaving the current values, nearly 10 years onward, well below the feasibility forecast. Still, doubling the price-per-carat revenue that looked to be the norm just three years ago is a huge improvement.
Mr. Wall, chief executive officer since the company disposed of his predecessor, Stuart Brown, last fall, was "extremely pleased" with his company's strong first quarter performance. He applauded the "record adjusted EBITDA of $44.6-million recorded in the first three months of the year." He was also pleased to have closed a $50-million (U.S.) junior credit facility with Mr. Desmond, the company's well-to-do major shareholder, who has opened his wallet on several occasions of late to support the company through its times of financial distress.
It has not been all hats and horns as more work is needed -- just not the kind that could make or break the company as had been the case over the past few years. Mr. Wall says that the two major problems, COVID and the bearing failure, "have been largely resolved" -- not quite in other words -- and there were other issues that cut the first quarter production that linger onward.
Production grade, Mr. Wall says, was impacted by unplanned external dilution from mining that was mainly the result of "workforce inefficiencies around shovel operations" and "bottom pit mining causing space constraints," in conjunction with a different ore mix than had been planned. The company is working with its joint-venture partner, De Beers, Mr. Wall cheers, "to address these operating issues." De Beers Canada is the operator, so what Mr. Wall presumably means by "working with" is that his company is standing behind its partner, fingers crossed, cheering it on.
Whether there will be continued good cheer in the current quarter is unclear. Rough diamond prices are about 5 per cent below their mid-February high, but they do remain buoyant, and Mountain Province is just wrapping up its current sale in Antwerp -- the first of the quarter. The next and final sale of the quarter -- this will be a two-sale quarter it appears -- will run from the end of May to mid-June.