Gahcho Kué diamond mine earnings fall in ‘disappointing’ market for De Beers JV

Mountain Province Diamonds (TSX: MPVD) says its third-quarter earnings fell and mine operations swung into a loss as costs rose and grades dropped at the Gahcho Kué joint venture with Anglo American (LSE: AAL) unit De Beers in Canada’s far north.

Adjusted earnings before interest, tax, depreciation and amortization declined to $17.3 million for the three months to Sept. 30 compared with $25.1 million a year earlier, the company reported on Wednesday.

Operations at the mine in the Northwest Territories lost $11 million compared to an income of $2.7 million in last year’s third quarter, Mountain Province said. Cash costs rose to $125 (US$90.20) per tonne treated versus $118 per tonne in last year’s period, and increased to $101 (US$72.90) per carat recovered compared to $78 per carat a year earlier, it said.

Gahcho Kué, Mountain Province’s sole producing asset, mined 14% more stones during this year’s first nine months while ore grade dropped 17% compared with the same period last year. Lower grades were planned during this year’s third quarter but the reduced quality wasn’t expected in March and early second quarter, president and CEO Mark Wall said in a release.

“The first nine months of 2024 has produced positive operational results in a period of challenging diamond prices,” Wall said in a release. “While the diamond market has been disappointing during the period, I am optimistic that the price environment will recover during 2025.”

Big investors

Shares in Mountain Province were unchanged on Thursday in Toronto at 14¢ apiece, valuing the company at $27.6 million. They’ve slid by nearly half this year. Leading investors include Irish billionaire Dermot Desmond and Africa’s largest asset manager, the Pretoria-based Public Investment Corp.

The mine located 280 km northeast of Yellowknife is considered one of Canada’s largest diamond producers by volume and is scheduled to operate until at least 2031. It’s unclear how Anglo American’s plans to divest De Beers, which owns 51% of the Gahcho Kué joint venture while Mountain Province holds 49%, will impact the mine. All gem mine operators have been facing difficult markets as expanding synthetic stone adoption and a sluggish Chinese economy lower consumer demand.

Still, Mountain Province’s costs for treated stones during the nine months were 21% lower than last year, Wall said.

“On costs, we are well advanced in more expensive pit-bottom mining in both the Hearne and 5034 open pits,” he said. “The focus on operational efficiency and costs remains front of mind.”

The operation sold 679,599 carats during the third quarter for a total of $69.4 million at an average price of $102 (US$75) per carat, the company said. That compared with 478,653 carats sold in third-quarter 2023 at an average price of $126 (US$95) per carat.

 “The company continues to successfully navigate a challenging market,” Reid Mackie, vice-president of sales and marketing, said in the release. “Our sales achieved 100% sell-through with no unsold stock held at the end of September and a higher average selling price than the three preceding quarters.”

Holiday sales

Mountain Province expects to benefit from any improvements in rough diamond demand after the approaching American holiday season. It starts with Thanksgiving and Black Friday late this month through Christmas and New Year’s, Mackie said.

The company will continue to focus on costs and efficiencies next year and assess financing requirements, the CEO said. It plans production to be similar to this year followed by a strong 2026, he said.

For the year’s first nine months, Mountain Province swung into a net loss of $18.6 million or 9¢ loss per share compared with income of $32.1 million or 15¢ per share in the year earlier period. The amount included a $6.2 million loss in currency exchange because the company’s long-term debt is in U.S. dollars.

Revenue for the nine months fell to $215.7 million at an average realized value of $99 (US$73) per carat compared with $248.9 million in 2023 at $138 (US$103) per carat. The joint venture spent $54.9 million on capital costs including $47.7 million for deferred stripping and $7.2 million for sustaining capital expenditures related to mine operations.