Mountain Province Diamonds Reports Strong Q1 2017 Performance Amidst Gahcho Kué Ramp-Up and Commercial Launch

Mountain Province Diamonds Inc., a leading player in the Canadian diamond mining sector, recently unveiled its operational and financial results for the first quarter ending March 31, 2017. This period marked a pivotal phase for the company, characterized by the successful transition of the Gahcho Kué Diamond Mine into full commercial production. The results underscored robust operational efficiency and promising initial sales figures, cementing the mine’s position as a significant source of high-quality rough diamonds.

The Gahcho Kué Diamond Mine, a strategic joint venture where Mountain Province holds a 49% interest alongside its partner De Beers, demonstrated impressive progress during Q1 2017. The processing plant successfully treated approximately 492,000 tonnes of ore, leading to the recovery of an estimated 867,000 carats on a 100% basis. This volume translated into an average grade of approximately 1.76 carats per tonne, a figure that resonated positively within the industry.

Exceptional Production Grade Exceeds Q1 Expectations

One of the standout achievements reported by Mountain Province Diamonds was the recovered grade for the first quarter, which impressively stood approximately 17% above the budgeted target. This significant variance highlights the rich nature of the ore body and the efficiency of the processing operations at Gahcho Kué. While acknowledging this positive development, the company maintained a prudent stance, noting, “It remains unclear at this time whether or to what extent this positive grade variance will be sustainable.” This cautious outlook is typical in the mining industry, reflecting the natural variability of ore deposits and the need for sustained performance over time to confirm long-term trends.

For Mountain Province Diamonds, its attributable share of this robust first-quarter diamond production amounted to approximately 424,830 carats. This substantial volume underscores the company’s direct participation and significant stake in one of the world’s most prominent new diamond mines. The strong initial production figures set a positive tone for the financial year, indicating the mine’s potential to become a consistent contributor to global rough diamond supply.

Gahcho Kué Officially Enters Commercial Production Phase

A landmark moment for Mountain Province Diamonds and the Gahcho Kué project occurred on March 1, 2017, with the official declaration of commercial production. This critical milestone followed the successful achievement of more than 70% of the mine’s nameplate capacity, which is established at 8,226 tonnes per day, sustained over the preceding 30-day period. The transition to commercial production signifies that the mine has successfully navigated its development and ramp-up phases and is now operating at a level deemed economically viable and sustainable.

The journey to commercial production began much earlier, with the initial production ramp-up commencing in August 2016. The period from ramp-up through the completion of the third sale in March 2017 saw Mountain Province achieve significant preliminary sales. During this eight-month pre-commercial production phase, the company sold a total of approximately 523,000 carats, generating total proceeds of US$ 40.4 million. This translates to an average price of approximately US$ 77 per carat for these early sales.

It’s important to note, as the company clarified, that “This represents the sale of diamonds produced during the pre-commercial production phase, and, importantly, includes proceeds received in 2016 from De Beers through the bidding for Fancy and Special diamonds, and will not be comparable to any quarterly operating results.” This distinction is crucial for investors and analysts, as pre-commercial sales often involve different pricing strategies and market conditions compared to regular quarterly operations.

Detailed Diamond Sales Performance in Q1 2017

During the first quarter of 2017, Mountain Province Diamonds actively engaged in the market, conducting three distinct sales through its dedicated diamond broker based in Antwerp, Belgium – a globally recognized hub for diamond trading. These sales encompassed a diverse range of approximately 522,000 carats, including highly sought-after Fancy and Special diamonds, which typically command premium prices due to their unique characteristics and rarity.

The proceeds recovered from these three sales amounted to approximately US$ 37.7 million, yielding an average price of US$ 72 per carat. While a portion of the third sale concluded subsequent to the end of the quarter, the majority of these proceeds were received by April 5, 2017. The structured approach to sales through an established broker in Antwerp underscores Mountain Province’s commitment to maximizing value for its rough diamond production.

Value Segmentation: Gem and Near-Gem vs. Industrial Diamonds

A deeper look into the sales data reveals the qualitative strength of the Gahcho Kué output. Gem and near-gem diamonds were the primary drivers of revenue, contributing approximately 96% of the total diamond sales proceeds. These higher-quality stones fetched an impressive average price of US$ 118 per carat, reflecting strong demand and market appreciation for their brilliance and clarity. By volume, gem and near-gem diamonds represented approximately 57% of the first-quarter sales, indicating a significant proportion of high-value stones within the overall production mix.

In contrast, industrial diamonds, which typically serve manufacturing and abrasive applications rather than jewelry, accounted for the remaining 4% of proceeds. These diamonds were sold at a significantly lower average price of US$ 7 per carat, a standard market differentiation that highlights the substantial value premium commanded by gem-quality stones. This clear distinction in pricing emphasizes the importance of the mine’s ability to recover a high percentage of gem and near-gem quality diamonds to ensure robust profitability.

Promising Price Increase in Post-Quarter Sales

Building on its Q1 performance, Mountain Province Diamonds reported further positive developments from its fourth sale, which successfully closed on May 5, 2017. For this sale, the company realized an even higher average price of US$ 86 per carat. This figure represents a notable 19% increase over the average price per carat achieved in the first quarter, signaling potentially improving market conditions for rough diamonds or a favorable change in the product mix offered in this specific sale. Such an uplift in per-carat value is a strong indicator of positive market reception and effective sales strategies.

Financial Overview: Navigating the Transition Phase

From a financial perspective, Mountain Province reported a net loss of C$ 2.1 million, or C$ 0.01 per share, for the three-month period ended March 31, 2017. A net loss during a period of ramp-up and transition to commercial production is not uncommon for mining companies, as significant operating costs are incurred before the full revenue potential is realized. These costs typically include expenditures related to ongoing development, commissioning, and establishing full operational capacity.

Despite the net loss, the company maintained a healthy liquidity position. As of March 31, 2017, Mountain Province Diamonds held cash and restricted cash totaling C$ 77.5 million. This robust cash balance provides the company with significant financial flexibility to support ongoing operations, manage working capital requirements, and invest in any further optimization or development activities at the Gahcho Kué mine. A strong cash position is vital during growth phases to absorb initial costs and ensure long-term stability.

Leadership Confident in Path to Full Production

Patrick Evans, President and CEO of Mountain Province Diamonds, expressed strong confidence in the mine’s trajectory. Commenting on the quarterly results, Mr. Evans stated, “Since declaring commercial production on March 1 the ramp-up has been strong and we expect to reach full production in the current quarter.” This statement provides a clear forward-looking outlook, indicating that the company anticipated rapidly achieving optimal operational efficiency and maximum output at Gahcho Kué shortly after the first quarter.

The CEO’s optimism reflects the successful execution of the mine plan and the effective management of the complex transition from construction and commissioning to full-scale commercial operations. Reaching full production capacity is a crucial step for any mining project, as it allows for economies of scale, optimizes cost structures, and maximizes the return on substantial capital investments. This outlook solidified investor confidence in the long-term profitability and sustainability of the Gahcho Kué Diamond Mine.

Strategic Implications and Future Outlook

The Q1 2017 results from Mountain Province Diamonds underscore the strategic importance of the Gahcho Kué mine within the global diamond industry. As one of the world’s largest and richest new diamond mines, its performance directly impacts the supply chain of rough diamonds. The partnership with De Beers, a world leader in diamonds, further enhances its significance, combining operational expertise with market access.

Looking ahead, the successful ramp-up and the achievement of full commercial production were expected to position Mountain Province Diamonds for consistent operational performance and improved financial results in subsequent quarters. The ability to consistently recover high-grade, gem-quality diamonds, combined with efficient processing, is key to sustained profitability in the competitive diamond market. The company’s transparency in reporting and its strategic focus on maximizing value through structured sales channels further build trust among stakeholders. Mountain Province Diamonds continues to be a key entity to watch in the evolving landscape of diamond exploration and production.

News Source : gjepc.org