Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Since resuming regular diamond tenders in September, Mountain Province Diamonds (TSX: MPVD) has seen prices for its goods start to rise.
In fact, the diamond junior, which owns a 49% stake in the Gahcho Kué mine in the Northwest Territories, says its Oct. 30 sale in Antwerp was its largest open market sale to date, setting a new record in terms of both value and volume.
The record sale follows a near total closure in the diamond market in the spring due to the covid-19 pandemic and related travel restrictions.
About 75% of the company’s third-quarter revenues came from its sales agreement with Dunebridge Worldwide
The October sale – its second regular commercial sale since the beginning of the pandemic – brought in C$45.7 million from 559,528 carats sold at an average realized diamond price of $61 per carat.
That compares with third-quarter sales for the period ended Sept. 30, of 956,000 carats at an average realized price of $37 per carat. (In the third quarter of 2019, Mountain Province sold 791,000 carats at an average of $53 per carat.)
“After a sustained period of negative news with respect to the diamond industry and dealing with the impact of the covid-19 pandemic, we are pleased to see that the market for rough diamonds is starting to show some positive momentum,” said Stuart Brown, Mountain Province’s president and CEO, in a release.
“In the third quarter we have seen prices recovering close to pre-Covid levels from the lows seen during the peak of the pandemic. Although demand for rough diamonds is not yet back to pre-covid-19 levels, the low amount of supply coming into the market has helped raise industry confidence levels which has been a driving factor impacting demand and rough prices during the quarter.”
Mountain Province reported a net loss of C$6.5 million for the quarter on revenues of C$47.3 million, compared to a net loss of C$25.8 million in the same period of last year on revenues of C$54.8 million.
About 75% of the company’s third-quarter revenues came from its sales agreement with Dunebridge Worldwide, instituted in June. The company has now used $49.4 million of the $100-million agreement, which is good through the end of 2020, and applies only to stones under 10.8 carats.
Gahcho Kué is operated by Mountain Province’s 51% partner De Beers. For the quarter, 1.8 million carats were recovered at an average grade of 2.19 carats per tonne, up 17% from the 1.5 million carats recovered at a grade of 1.71 carats per tonne in last year’s comparable quarter. Total tonnes mined decreased by 16% to 9.9 million tonnes.
The mine is expected to produce 6.3-6.4 million carats (on a 100% basis) in 2020 at cash costs of C$100 to C$110 per tonne.
(A version of this article first appeared in the Canadian Mining Journal)
