from stockwatch
Diamond & Specialty Minerals Summary for Aug. 21, 2024
2024-08-21 13:58 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Wednesday was a mediocre 78-79-153 as the TSX Venture Exchange rose six points to 577. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) lost one-half cent to 12.5 cents on 12,000 shares. The company continues to mine diamonds at its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories, but it and its majority co-venturer, De Beers, have cut costs so much of late that their exploration efforts to extend the mining life are lagging.
Although the Gahcho Kue joint venture spans over 5,200 hectares, most of the recent exploration on the project has centred on near-mine and brownfield discoveries. The first such find turned up early in the life of the mine, when the NEX and SWC extensions to what was already the irregular-shaped 5034 pipe were cheered as additional sources of ore. Since then, De Beers and Mountain Province added the Wilson kimberlite, near the Tuzo pipe, and most recently, the Hearne Northwest Extension.
All these finds appear comparable in grade and diamond value with the three main pipes, 5034, Hearne and Tuzo, which the partners have been mining since 2016. Unfortunately, some of the material will require underground mining, and late last year, De Beers and Mountain Province "made the prudent decision to limit discretionary spending" because of weak rough diamond prices. Among the items discretely put on hold were the internal studies regarding a potential move to underground mining, which could add significantly to the life of the mine -- assuming rough diamond prices support such a move.
At the time, Mr. Wall, Mountain Province's president and chief executive officer, assured investors that his company would "take all reasonable steps to maintain underground mining optionality." Of course, the company has just a 49-per-cent say in the matter -- in other words, no real say at all -- and De Beers has been doubling down on its prudence, shutting down its Canadian subsidiary and all its remnant exploration programs, as rough diamond prices have fallen a further 11 per cent this year.
That pause and the suspension of the underground studies also leaves over 20 million carats that Mountain Province holds in its Kennady North project in extended limbo as well. The company spun off Kennady as a new company in 2012, then reacquired it at considerable expense -- stock worth about $175-million -- in 2018, giving Kennady's shareholders about a one-quarter of the expanded Mountain Province's shares.
The merger did give Mountain Province a significant resource, with 8.5 million tonnes indicated in the Kelvin kimberlite grading 1.6 carats per tonne, 2.07 million tonnes inferred at Faraday 2 at 2.63 carats per tonne and 1.87 million tonnes inferred at Faraday 1-3 grading 1.04 carats per tonne. In all, the three bodies host an estimated 21 million carats, with diamond values comparable to what Gahcho Kue produces. And so, it might seem likely that Kennady North will add over three years to the life of Gahcho Kue.
But wait! There is a dark inclusion in what might otherwise appear to be a sparkling gem of a plan. Mountain Province owns a 100-per-cent interest in the Kennady North project, and unless De Beers acquires a 51-per-cent interest it is unlikely to process the Kennady kimberlite while any of the Gahcho Kue rock remains. Further, given the state of the rough diamond market, De Beers is unlikely to pay more than a nominal amount to buy into Kennady North. Meanwhile, Mountain Province's accountants doggedly continue to carry the project with a value of $170-million on the company's books.
And there is more to consider. The three Kennady North kimberlites are unlike the carrot-shaped pipes at Gahcho Kue in that they are significantly and irregularly tilted, making open-pit mining difficult. Accordingly, the studying -- now on pause, remember -- considered the three Kennady kimberlites as candidates for underground mining. As a result, an arrangement that would have Gahcho Kue include the Kelvin and Faraday kimberlite in its mine plan seems unlikely any time soon.
Nevertheless, Mountain Province carries on. While exploration is all but stopped for now, the company is spending the summer completing land surveys to take several of the claims in the Western Area zone to mining lease status. It is also looking to drop claims with no potential, but before it does, another round of till sampling and geophysics is planned to assess both diamond and base metals potential. Base metals, you ask? Yes, as Mr. Wall and his crew will eagerly tell you, drilling in the WW area provided eyeball assays of molybdenite. Stay tuned but stay patient.