from stockwatch 2023-06-30 16:27 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Friday was an upbeat 103-61-146 as the TSX Venture Exchange jumped eight points to 621. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) added 1.5 cents to 46.5 cents on 10,000 shares.
July is just around the corner and with it will come Mountain Province's sixth tender of rough diamonds this year, completed through the facilities of Antwerp-based Bonas Group. (Bonas also sells production for Lucara Diamond Corp. (LUC: $0.47) and Stornoway Diamond Corp. -- the new Stornoway, not the one that went bankrupt in 2019, crushed to death under the weight of a mountain of debt and stagnant rough diamond prices.)
Unfortunately, rough diamond prices are faring little better than they did in the late 2010s, and that is again weighing heavily on Mountain Province's stock chart. The stock traded above $7 in the fall of 2016, but it has essentially been flatlined near the 50-cent mark since the COVID-19 outbreak in early 2020. (The stock bottomed at 25 cents that year, but that was when beleaguered shareholders were bracing for word they would be facing the same plight that carried Stornoway and Dominion Diamond Mines off to their demise.)
The dreaded news never arrived. Instead, Mr. Desmond an Irish billionaire who invested in the company a quarter century ago, rode into the fray on his white horse, buying $50-million (U.S.) of the company's rough diamonds when nobody else would, and lending the company another $50-million (U.S.) to tide it over through the storm. (Shareholders were sufficiently relieved that they never noticed Mr. Desmond's suit of armour was more a shade of grey, as he managed to line his pockets with the warrants, fees and interest rates attached to the loan and the diamond purchases.)
Mountain Province went on to right its balance sheet over the past two years, and so it should be able to weather anything short of another Category 5 storm in the diamond sector. Still, Mr. Wall, president and chief executive officer, might want to keep Mr. Desmond on speed dial, based on the recent direction of the rough diamond market.
There was a glimmer of hope on that front this week, mind you, as Paul Zimnisky's global rough diamond price index sat unchanged over the week, ending -- or at least pausing -- a slide that began 15 weeks earlier with prices nearly 10 per cent higher than now. And so, Mr. Zimnisky has rough prices 18.3 per cent lower than in early 2022, when they hit a record high, but he also has them just 6 per cent higher than where they were through most of the 2010s.
Where to now is the question: Traditionally bullish analysts suggest prices can only go up, but more of them are casting a wary eye toward the synthetic sector, where manmade diamonds up to a carat or two in size can be crafted at considerably less cost than they can be mined. The good news for Lucara and its Karowe mine in Botswana, and for Star Diamond Corp. (DIAM: $0.09) and its FalCon project in Saskatchewan, is that both contain a healthy proportion of large diamonds that cannot yet be duplicated by the synthetic producers.
Not today at least, that is, but one must remember that many a tomorrow will become yesterdays before Lucara and Star's energetic plans run their full course. Lucara is building a major underground expansion at Lucara that would keep it running until at least 2040. Meanwhile, Star Diamond's ballyhooed 38-year mine -- some say it could go for 84 years -- is still just a drawing board dream. And so, if diamonds are still your fancy, keep one eye cast toward Mr. Zimnisky's chart and the other on the lookout for updates from the synthetic market.