Mountain Province Diamonds borrows $33M following shutdown

Mountain Province Diamonds is borrowing US $33 million from its largest shareholder as it faces “serious financial difficulty” following a February shutdown of the Gahcho Kué diamond mine.   

Stuart Brown, president and chief executive of Mountain Province, said the 22-day operational stand-down at the NWT mine due to a Covid-19 outbreak meant the loss of three to four weeks of production.

The company had to cancel a planned diamond sale in Antwerp, Belgium in May. Brown estimates the loss at around $25 million. 


Combined with significant expenses from the annual winter road season, Brown said, the loss posed “short-term liquidity challenges” for the company.

“Just after the winter road closes, we’ve got to start paying all the creditors,” he said. “We bought all that material that we’ve shipped up the winter road so that’s a big cash outflow period for us.”

Mountain Province, which owns a 49-percent interest in Gahcho Kué, announced the loan from Dunebridge Worldwide Ltd – whose owner is a 32-percent shareholder in Mountain Province – on Wednesday.

That loan is expected to reduce to $22 million by July 15 and will fully mature on December 31. It will accrue interest at a fixed rate of 10 percent per year, payable monthly, plus five percent payable on each advance. 

Brown said the short-term loan will help the company until the end of the year while it makes up the production shortfall.


“I lost a lot of cash in a quick period of time and I’ll gain it back over the rest of the year,” he said.

The company plans to make up lost production by increasing the tonnage and improving the average value of diamonds recovered. Brown expects that will drive the recovery of between 6.3 to 6.5 million carats, or just below 2020’s recovery of 6.5 million carats. 

“The mine’s picking up now and doing well, and I think we’re coping with the Covid situation,” he said. 

Brown expressed confidence that natural diamond retail sales have strengthened over the past quarter as countries begin to reopen and money flows back into economies. 

The NWT government declared a Covid-19 outbreak at the mine on February 4. Two days later, De Beers, which operates and owns 51 percent of Gahcho Kué, announced it would be temporarily suspending operations at the mine

Before the outbreak was declared over on March 26, 12 out-of-territory workers and eight NWT residents tested positive for Covid-19. Three workers were hospitalized. 

The company’s 2021 first-quarter results reported a profit of $7.3 million, compared to a loss of $40.1 million during the first quarter of 2020. 

In total, the company sold 603,000 carats for $54.2 million, marking a near return to pre-pandemic carat value.