2021-04-14 16:40 PT - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Wednesday was a negative 73-110-117 as the TSX Venture Exchange fell eight points to 924. Data from diamond guru Paul Zimnisky suggests that the rally in rough diamond prices has peaked. Mr. Zimnisky's global rough diamond price index dipped 0.1 per cent again last week, putting it 0.3 per cent below its late March high, a peak that was nearly 20 per cent above the COVID-19-driven low set a year ago.
The rally that began in late spring and ran until late winter was a welcome relief to companies looking to sell copious amounts of rough diamonds. That group includes Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD), which added two cents to 53 cents on 145,000 shares following word that it had a decent start to 2021 despite its mid-winter hiccups at its 49-per-cent-owned Gahcho Kue mine, 250 kilometres northeast of Yellowknife.
The location is both a blessing and a curse in these COVID days, as the company's crews are locked safely away at a remote location for nearly a month at a time, but then they scurry off to their home communities across the North and many locales in southern Canada. In February, one of the returning miners brought back more than his luggage and the mine was shuttered for a three-week period.
As a result of the unplanned operational stand-down and what Mr. Brown, president and chief executive officer, conceded was a "problematic restart of production" in the middle of winter, Gahcho Kue managed to mine just 515,000 tonnes of kimberlite. A year ago, the mine excavated just over one million tonnes of kimberlite and processed just over 900,000 of those tonnes, recovering 1.66 million carats. This year, the mine processed 625,000 tonnes aided by some stockpiled rock and recovered 1.39 million carats.
While the mining rate was just half what the mine managed a year ago, Gahcho Kue closed the carat-crop gap significantly thanks to a higher grade. The mine managed 2.23 carats per tonne in the first quarter of 2021 compared with just 1.83 carats per tonne a year ago. The mine's grade ebbs and flows depending upon where the kimberlite is coming from: Some parts of the AK-5034 pipe average well over two carats per tonne while other areas grade about 1.7 carats per tonne.
Mountain Province's diamond sales have recovered nicely from their pandemic lows, but not to the extent investors may have hoped. The company sold just over 600,000 carats during the quarter for $42.7-million (U.S.), or about $71 (U.S.) per carat. That is handily above the $64 (U.S.) per carat that the company averaged in the last quarter of 2020 and, it cheers, on a like-for-like price book basis the average diamond value is now ahead of prices achieved in the first quarter of 2020.
At first glance that appears to be cheerful news, at least until investors recall that Mountain Province's February sale was to have been chock full of large and valuable diamonds. In January, as Mr. Brown was revealing that the company had averaged a hefty $90 (U.S.) per carat for nearly 242,000 carats offered in its first sale of the quarter, he enthused about the upcoming offering that was to include, "amongst other high-value diamonds, the recently recovered 157-carat diamond" that had been dubbed Polaris.
There is no indication what Polaris sold for, or what the company averaged with its February sale, which wrapped up in early March to complete silence. Nevertheless, the numbers show that with the January sales data removed, Mountain Province sold an additional 360,900 carats during the first quarter for $20.9-million (U.S.), or just $58 (U.S.) per carat. It is unclear if the revenue from sales of large and high-quality gems were disappointingly low, or if the company also dashed off a large amount of low-quality goods to market on the quiet -- a standard promotional trick.