2024-02-26 16:15 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Monday was a weak 70-116-124 as the TSX Venture Exchange rose two points to 550. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) lost one cent to 24 cents on 99,000 shares. The company has found some additional good cheer, as it has added more carats to its 2024 guidance for its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories.
The key guidance for a diamond mine is the annual carat count, of course, and Mountain Province and its majority co-venturer, De Beers Canada, have been beavering away on their mine plan to smooth out production at Gahcho Kue. Their long-range production forecasts, you see, had been calling for a bleak 2024 since the latest mine plan was rolled out two years ago.
Gahcho Kue produced 5.55 million carats in 2022 and nearly the same amount in 2023, both figures hampered by processing plant issues, and on one occasion because of COVID-19. COVID was a bigger factor in 2021, when the mine managed 6.2 million carats. COVID was of course a huge problem in 2020, but Gahcho Kue produced 6.5 million carats, as De Beers kept the mine running throughout the crisis despite the market for rough diamonds having dried up.
In fact, the six-million-carat-per-year threshold has been the floor, breakdowns and pestilence aside, since Gahcho Kue began mining late in 2016. Indeed, the co-venturers expected to carry on with production regularly topping six million carats per year to at least 2025, and to top five million carats until 2030, according to the mine plan.
Except for 2024, that is: The mine plan had called for production of just 3.3 million carats this year, as Gahcho Kue temporarily halted mining at the flagship 5034 pipe and ramped up mining at the new Tuzo pit to accommodate the big drop. The halt at 5034 was designed to allow a pit expansion, which in turn would allow a new flood of gems to boost production to 7.1-million-carat feast in 2025 -- but to get there, the partners would have to endure a famine in 2024.
The good news is that De Beers and Mountain Province were able to smooth out the production significantly. A year ago, Mountain Province upped its 2024 projection to between four million and 4.4 million carats, a gain of roughly 900,000 carats. The total life-of-mine production did not change materially, the company said, with the boost in 2024 being the result of smoothing the production profile -- presumably moving carats from 2025 ahead a year where possible.
Now, cheers Mr. Wall, Mountain Province's president and chief executive officer, the co-venturers expect Gahcho Kue to yield between 4.2 million and 4.7 million carats, a further increase of about 250,000 carats. Those carats were not wrested away from 2025 this time -- instead the company says the boost is being "driven by an expected increase in recovered grade, as well as expected improvements in plant throughput and overall process utilization."
Even so, 2024 looks to be a lean year on the mining end of things. The company puts its projected production costs at between $96 and $107 per carat -- roughly $75 (U.S.) per carat. That is worrisome, as that figure is about what Mountain Province has been averaging for its diamonds since mining began. Fortunately, even if rough prices do run at that level throughout the year, Mountain Province does have stockpiled diamonds for sale.
Those gems along with new production, say Mr. Wall and his crew, should see the company selling between 2.3 million and 2.6 million carats, compared with Mountain Province's share of new production, which would be between 2.05 million and 2.3 million carats. While most of the nearly 300,000 stockpiled carats are dominated by less expensive diamonds, they nevertheless will contribute a welcome boost to the company's bottom line.
Even so, there is not much wiggle room in the numbers, as the production costs per carat are indirectly proportional to the number of carats mined. Further, remember that for 2022, the company forecast its costs at about $55 (U.S.) per carat, and for about the same amount last year. Meanwhile, Mountain Province averaged $112 (U.S.) per carat at its sales in 2022 yet managed a profit of just $49-million. And so, stay tuned and vigilant, but remember: The mine plan says cheerful days are on their way in 2025.