Mountain Province Diamonds Announces Q3 Production and Sale Results
Mountain Province Diamonds Inc. has announced production and sales results for the third quarter ended September 30 from the Gahcho Kué Diamond Mine.
The miner reported 1,528,494 carats recovered at an average grade of 1.72 carats per tonne, 16% lower than comparable quarter (Q3 2018: 1,819,000 carats at 2.40 carats per tonne), and 12% lower than the previous quarter (Q2 2019: 1,730,147 carats at 1.96 carats per tonne).
Q3 2019 carat recovery was slightly below the company's expectations but within the revised plan limits for 2019. As previously announced, the ongoing plant modifications in order to change bottom cut off and increase daily throughput have progressed well and the plant is performing above expectations, consistently achieving higher daily throughputs. The severe weather conditions encountered during the earlier part of the year caused delays in the mine plan schedule, and access to the planned higher grade blocks of the orebody was limited.
In addition, higher plant throughput capability as a result of the ongoing plant modifications, and subsequent need for more ore sources, required the processing of all available ore sources, which mostly consisted of lower grade ore tonnes, all of which are reflected in the lower grades and carats recovered in Q2 and Q3 2019 results. The current quarter (Q4 2019) is trending positively. Access to higher grade blocks has been achieved and the Company reiterates its full year 2019 production guidance of 6.6 – 6.9 million carats.
The firm sold 791,252 carats at an average value of $69 per carat (US$52.5 per carat) for total proceeds of $54.8 million (US$41.6 million) in comparison to 788,842 carats sold at an average value of $95 per carat (US$72.5 per carat) for total proceeds of $74.9 million (US$57.2 million) in Q3 2018.
The lower prices realized year-on-year were affected by three factors; the source of the diamonds from varying parts of the orebody (mostly lower grade areas of Hearne and SWC Kimberlites in 2019 versus 5034 in 2018), lower quality and grade material processed during Q2 and Q3 2019, and the overall sentiment in the rough diamond market and associated pressure on prices of lower quality and smaller stones.
The company's Q3 2019 sales results are based on two full sales (sales #6, and #7) and partial payment received for sale #8, due to timing of the last sale in relation to the close of Q3 2019 financial reporting period. Full payment for sale #8 has been received and the remaining balance will be reflected in the sales results in Q4 2019.
The sentiment in the rough diamond market remains cautious and the most recent sales results reflect this. The recent protests in Hong Kong and ongoing trade negotiations between US and China have also affected the mood in the market.
The company's medium to long term outlook for rough diamonds remains positive. The major producers have reported lower levels of sales in recent months, and this is expected to help normalise inventory levels in the cutting centers. In addition, anticipated mine closures over the next 12 – 18 months will also help to establish a better supply and demand balance in the market. More importantly, consumer confidence and spending, particularly in the US, which makes up for 40 – 50% of the overall diamond jewelry market, is still strong.
Q3 2019 Summary
Total carats recovered and grade in Q3 2019 were 16% and 28% lower respectively than the same period last year, and slightly less than expected for the quarter. The lower grade and carats recovered during Q3 2019, are primarily due to the mining and processing of lower grade ore tonnes from the 5034 SWC, in addition to larger volumes of ore tonnes mined and treated from the 5034 Center Lobe, which is the lowest grade part of the 5034 Kimberlite. Weather and equipment related challenges faced during the winter months further affected the mine sequencing for 2019, however, the shortfall in ore tonnes mined for the year will be recovered, with the ability to feed the plant with higher grade ore for the remainder of the year.
Despite all the challenges in the earlier part of 2019, the mining operations are trending positively in the current quarter (Q4 2019) and the company is on track to achieve its full year guidance of 6.6 million carats – 6.9 million carats, and at the lower end of the cost guidance of $110 - $115 per tonne treated.
Stuart Brown, the Company's President and Chief Executive Officer, commented: "From a production perspective I fully expect 2019 will be a successful year. The start to the year was impacted by severe winter weather, restricting access to the planned higher grade ore sources which limited the ability to blend the ore sources. The decision to make changes to the plant has been very successful. The plant is now able to treat different blends of ore at increased feed rates which was never possible at the start of 2019. In order for the plant to continue operating at full capacity and maintain its new higher daily throughputs, all ore sources were utilized which were primarily made up of lower grade material. While this has impacted the third quarter performance from a carats recovered perspective, I am pleased to report that the final quarter production is trending upwards and the company remains on track to deliver 2019 guidance metrics."
Mr. Brown added: "The rough diamond market remains tight. Geopolitical and trade war tensions together with the recent issues in Hong Kong have not been helpful in improving sentiment across the diamond pipeline. Our medium to long-term view of the market remains positive. The major producers have seen reduced levels of sales in their recent rough diamond sales events and this, together with the closure of older mines, should have a positive effect on the supply side of the market in 2020 and beyond and help to restore confidence across the diamond pipeline."