Mountain Province Diamonds, part-owner of the Northwest Territories’ Gahcho Kué diamond mine, has extended a US $25-million revolving credit facility, saying the company is in “serious financial difficulty.”
The company announced the six-month extension of the line of credit from Dunebridge Worldwide, its largest shareholder, in a Monday news release. It now expires on March 31, 2022.
A revolving credit facility is a flexible form of credit where the borrower is allowed to draw down, withdraw, or repay money repeatedly until the line of credit expires.
As a condition of extending the line of credit, Mountain Province fully paid off a separate US $33-million loan from Dunebridge that was originally due on December 31.
In its news release, Mountain Province’s independent directors said the transaction was “reasonable” and the “best alternative” for the company and its stakeholders. The line of credit is designed to improve Mountain Province’s financial position and help with “general working capital needs.”
Matthew MacPhail, vice president of corporate development and technical services, told Cabin Radio paying off the loan early was a “positive update” for the company.
MacPhail said the news release’s reference to the company being in “serious financial difficulty” was a “boilerplate statement” to assure shareholders the transaction was in the best interest of the company, not simply a large shareholder enriching themselves.
Dermot Desmond, owner of Dunebridge Worldwide, owns 33 percent of Mountain Province’s shares.
MacPhail said the difficulties faced by the company are “nothing major right now” and similar to those experienced over the past two years as a result of the Covid-19 pandemic.
In May, Stuart Brown, president and chief executive of Mountain Province, told Cabin Radio a 22-day operational stand-down at Gahcho Kué – triggered by a Covid-19 outbreak in February – had resulted in the loss of three to four weeks of production. The company also had to cancel a planned diamond sale in Antwerp, Belgium, in May, resulting in an estimated loss of $25 million.
But the company argues things are looking up.
According to Mountain Province’s second-quarter financial results for 2021, the company sold 719,000 carats for $64.7 million at an average value of $90 per carat. During the same period in 2020, the company sold 757,000 carats for $34 million at an average value of $45 per carat.
Earnings before interest, taxes, depreciation, and amortization totalled $37.9 million for the second quarter of 2021, up $10 million from the same period in 2020.
Third quarter results, released on Monday afternoon, indicate the company sold 1,028,327 carats for $93.9 million at an average value of $91 per carat, bringing sales for 2021 so far to $212.5 million.
“We’ve been benefitting from the increase in the rough diamond markets in general as the world continues to emerge out of this pandemic,” MacPhail said.
“We feel pretty strongly that, barring some sort of extreme resurgence or something of this pandemic, these diamond prices should persist and allow us to maintain that good margin on our production.”
Mountain Province owns a 49-percent interest in Gahcho Kué. De Beers Canada, which owns the remainder, operates the mine.