from stockwatch
Diamond & Specialty Minerals Summary for July 30, 2024
2024-07-30 15:53 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Tuesday was a ho-hum 71-89-150 as the TSX Venture Exchange fell one point to 572. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) fell 1.5 cents to 12.5 cents on 103,000 shares.
Mountain Province had a mediocre second quarter, but one not quite so bad as the market expected, according to its production and sales results. The company and De Beers Canada, its co-venturer at the Gahcho Kue mine in the Northwest Territories, had their lowest production grade since mining began in the fall of 2016 -- just 1.37 carats per tonne. In the early years, before COVID hit, the mine regularly topped two carats per tonne, and it averaged 1.75 carats per tonne through 2022 and 2023.
Fortunately, Gahcho Kue was able to make up in tonnage what it failed to accomplish with grade. The operation saw 971,000 tonnes of kimberlite mined in the second quarter, and nearly all that rock was processed in the plant. As a result, the mine yielded 1.32 million carats in the second quarter, down ever so slightly from the 1.34 million carats achieved a year earlier.
In the first quarter of 2024, Gahcho Kue produced 1.26 million carats, so the tally for the first half of 2024 is an encouraging 2.58 million carats -- an annualized rate of 5.16 million carats. In February, Mountain Province and De Beers boosted their 2024 guidance to between 4.2 million and 4.7 million carats, an increase over the four million to 4.4 million carats that had been projected a year earlier. That earlier forecast was also an increase, as 2024 had been projected to be a lean year as Gahcho Kue transitioned its operation to lower-grade ore for a time.
Whether the mine can maintain its processing pace through the rest of the year is unclear, although the stretch from late spring through the early fall is typically the best part of the year to mine in the Arctic by open pit. Either way, Mountain Province and De Beers have yet to revise -- or even comment upon -- their 2024 guidance. They did, however, dither about the lower-than-expected grade being achieved.
Yes, a lower grade had been expected in the quarter, says Mr. Wall, president and chief executive officer, but the company has also seen the lower-than-expected grade in the deep portions of the pits continue through the quarter, he concedes. The Gahcho Kue team "has been working on identifying and isolating the small area of grade underperformance," Mr. Wall says, promising that "as stated previously, this will improve as we move through the year."
The diamond value was another matter. Mountain Province sold 557,361 carats during the second quarter, fetching $41.5-million (U.S.) for its gems. That worked out to $74 (U.S.) per carat, one of the company's weaker quarters since prices recovered from the COVID crisis. Yes, the company had averaged just $70 (U.S.) per carat in the first quarter of 2024, but it sold nearly 940,000 carats then, including a significant quantity of smaller and lower-quality goods that it had been stockpiling, hoping for an improved market.
Mountain Province's average diamond price appears to have returned to the range in the three years before COVID, when it averaged about $70 (U.S.) per carat. Indeed, 2019 was a tough year, as the company averaged just $63 (U.S.) per carat. The COVID-infected 2020 result was worse, of course, and 2021 came in at $75 (U.S.) per carat, but the company applauded its 2022 result, in which it averaged $112 (U.S.) per carat, and 2023 was at least acceptable, at $90 (U.S.) per carat.
While Mr. Wall concedes that the diamond market "continues to be softer than anticipated," he and his crew continue to view the market through an optimistic filter. Whether any of his silver linings and lights at the end of the tunnel come to pass is uncertain at best, and in the meantime, Mountain Province and De Beers have halted discretionary spending and cut costs where they could to "focus on maximizing cash generation" -- otherwise known as "trying to avoid drowning in a sea of red ink." The financial numbers, expected in a few weeks, will show whether they have been successful, and the second quarter's carat crop should help.