Lower Prices Dent Solid 2019 Performance by Mountain Province Diamonds

Mining and Exploration
24/01/2020 10:50

Mountain Province Diamonds turned in a very strong production performance at the Gahcho Kué mine in Canada, particularly in the fourth quarter, but a 15% decline in the average price achieved for their rough diamonds over the course of 2019 dragged their proceeds down. A slightly lower recovery grade also curtailed their carat recovery, which ended just below 2018 levels. Still, the miner confirmed that Q4 and FY 2019 production results "were better than [ou] expectations, with recovered carats for FY 2019 coming in higher than the revised guidance of 6.7 – 6.8 million carats, attributable to the strong operational performance in Q4 2019."

Starting with sales, in FY 2019, the miner sold 3,284,520 carats, which is slightly more than the 3,252,491 carats sold in FY 2018. The caveat is that those carats were sold at an average value of US$63 per carat (C$84 per carat) for total proceeds of US$208.2 million (C$276.3 million), while in 2018 they sold their rough at an average value of US$74 per carat (C$96 per carat) for total proceeds of US$240 million (C$311 million). "The diamond market was somewhat difficult in 2019 with prices declining further in some categories," said Stuart Brown, the MPD's president and CEO.. "Nonetheless, positive signs started to surface late in 2019 and strengthening early in 2020." 

In Q4 2019, MPD sold 771,799 carats at an average value of US$64 per carat (C$84 per carat) for total proceeds of US$49.2 million (C$65.0 million) in comparison to 822,548 carats sold at an average value of US$65 per carat (C$86 per carat) for total proceeds of US$53.6 million (C$70.5 million) in Q4 2018. Despite modest sales in Q4, the company says, "Sentiment in the rough diamond market became slightly more optimistic towards the end of 2019 and has remained relatively positive as the market prepares for the first selling cycle of 2020." They add, "The Company's medium to long term outlook for rough diamonds remains positive. The major producers reported lower levels of sales through 2019 which, together with the stronger retail selling season, will help normalise inventory levels in the cutting centers. In addition, anticipated mine closures over the next 12 - 18 months will help to establish a more balanced supply and demand equilibrium in the diamond market."

On the production side, despite considerable gains in Q4, where MPD (and the Gahcho Kué mine) increased its carat recoveries by 28%, carat production for the year fell 2%. Total annual diamond production at Gahcho Kué was 6.8 million carats, with MPD's share being 3.3 million carats (Mountain Provice has a 49% share of the Gahcho Kué JV with De Beers Canada). Q4 production at the mine reached 1.98 million carats (1.55 million in Q4 2018. The tonnes of ore treated jumped 25% in Q4 and 12% for the year. "During FY 2019, the plant treated a record 3.58 million tonnes of ore, 12% higher than was achieved in FY 2018, demonstrating that the plant modifications of the past 12 months have been successful and the plant throughput capacity has significantly increased."

""Following the successful plant changes which have created more capacity and opportunity, I believe Mountain Province is well positioned for the next decade,' said Brown. "Gahcho Kué has a long mine life, and as demonstrated in 2019 with the discovery of the Wilson Kimberlite a strong potential for additional discoveries in our highly prospective land package."

Image: "Aurora over pit", Mountain Province Diamonds