2024-01-23 16:35 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Tuesday was a mediocre 70-89-151 as the TSX Venture Exchange rose fractionally to 551. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) was among the unchanged, closing at 25 cents on 242,000 shares.
Mountain Province rolled out its 2023 production and sales performance data for the Gahcho Kue mine in the Northwest Territories today, providing a clearer view of the wobbly rough diamond market. The company's 49-per-cent share of diamonds mined last year was 2.72 million carats, an ever-so-slight increase over the 2.70 million carats it recovered in 2022. It did so by processing more kimberlite, as the average grade last year -- 1.71 carats per tonne -- was down slightly from the 1.78 carats per tonne achieved in the previous year.
None of this comes as a surprise -- certainly not a pleasant one -- as the tonnes processed and carats recovered fell at the bottom end of the 2023 guidance for the mine. Gahcho Kue processed 3.25 million tonnes, nosing into the predicted 3.2-million-to-3.5-million-tonne range, while the carat haul matched the lower limit of the 5.6-million-to-6.1-million-carat prediction.
Also not a surprise are the sales data. Mountain Province sold 2.71 million carats last year, essentially keeping pace with its mining, fetching $244-million (U.S.) for the gems. A year earlier, the company sold 2.66 million carats for $297-million (U.S.). The $53-million (U.S.) drop in revenue is the result of a lower average sales price.
Last year, Mountain Province averaged $90 (U.S.) per carat, while in 2022 it managed $112 (U.S.) per carat. And so, the company's realized average price dropped 20 per cent from 2022, which had been its best year ever. The scale of the decline is accentuated when viewed through the company's quarterly sales data. In the first quarter of 2023, Mountain Province averaged $99 (U.S.) per carat for its diamonds.
"But wait!" you say, pointing to the company's second quarter sales, which averaged a hefty $124 (U.S.) per carat, and even to the third quarter, where it managed a reasonable $95 (U.S.) per carat. That is indeed so, but at the time, Mr. Wall, president and chief executive officer, did point out that the company withheld many of its lesser diamonds because of weakening prices, perhaps anticipating a market rebound.
Not so, as it turned out, and so Mountain Province sold nearly 918,000 carats in the final quarter, significantly more than it sold in the previous six months despite cancelling one of its three planned fall sales. Those gems -- brace for impact -- sold for just $60 (U.S.) per carat, the company's worst performance outside of the COVID collapse.
Mr. Wall acknowledged that his company's final sales of 2023 held "a finer assortment of goods," gems that had been held back earlier in the year. This, he said, resulted in a lower average per carat price, relative to earlier quarters. Further, he noted that the two-month moratorium on imports by the Indian diamond industry had an impact. (The biggest impact would have been a planned November sale, which went poof.)
Mountain Province has already completed its first sale of 2024, and although the results are unknown, Mr. Wall's comments do not inspire enthusiasm. While the Indian moratorium on imports is over, having ended in mid-December during the company's final sale of 2023, Mr. Wall says that "the market is now reopened, and we continue to monitor it closely to maximize value from our sales pipeline."
Monitoring of the rough diamond market shows that current prices are running about where they were in early 2019 and not far from average prices throughout the first three years of full production at Gahcho Kue. Those prices averaged just $72 (U.S.) per carat in 2017 and $74 (U.S.) per carat the following year, with 2019 sales managing just $63 (U.S.) per carat.
Remember that the company's feasibility study had been based on a modelled diamond value of -- yikes! -- $118 (U.S.) per carat -- and to make matters worse, Mountain Province's study insisted the diamond value would outstrip inflation by 1.5 per cent year after endless year. Indeed, through the first half of the 2010s, the company's then CEO, Patrick Evans, often touted the appraised diamond value of $174 (U.S.) per carat as more in keeping with the company's expectations. And so, an expectant market, one disappointed time and again, stays guardedly tuned for word of the company's first sale of 2024.