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Mountain Province Diamonds reports full year and fourth quarter results

Published by , Assistant Editor
Global Mining Review,

Yesterday, Mountain Province Diamonds Inc. (Mountain Province) announced its financial and operating results for the full year ended 31 December 2018.

Operational highlights for FY18

  • Strong annual production: Gahcho Kué Mine exceeded upper end of FY18 guidance of tonnes treated, 3 194 000 t (2017: 2 775 000 t) and recovered a record 6 937 000 carats (2017: 5 934 000 carats).
  • Average recovered grade up 4% above the original budget at approximately 2.17 carats per tonne (cpt) (2017: 2.14 cpt).
  • 3 253 000 carats sold in 2018 (2 656 000 in 2017), included in the 2018 sales were over 500 (2017: 250) gem quality stones exceeding 10.8 carats, including the recovery of an exceptional 95 carat white stone and a 60 carat fancy vivid yellow stone, further validating the mine as a producer of exceptional quality high value diamonds.

Financial highlights for full year 2018

  • Total sales revenue at CAN$311 million (US$240 million) compared to CAN$170 million in 2017 (US$134 million) at an average realised value of CAN$96 per carat (US$74) 2017: $85 per carat, (US$68).
  • Full year Adjusted EBITDA1 of CAN$139.2 million up 33% (2017: $103.4 million), demonstrating the good cash generation of the Gahcho Kué mine.
  • Earnings from mine operations up 55% to CAN$81.0 million (2017: CAN$52.1 million).
  • During the year, the company repurchased CAN$26.4 million (US$20.1 million) of outstanding secured notes payable (2017: nil).
  • Cash costs of production, including capitalised stripping costs1,2,3 of CAN$101/t treated (2017: CAN$73/t) and CAN$47 per carat recovered (2017: CAN$33 per carat).
  • Dividend paid of CAN$0.04 per common share totalling CAN$8.4 million (2017: nil). 
  • Net loss for full year 2018 at 31 December 2018 was CAN$18.9 million or CAN$0.10 loss per share (2017: net income CAN$17.2 million or CAN$0.11 earnings per share). Included in the determination of net loss for the full year at 31 December 2018 are unrealised foreign exchange losses of CAN$32 million, on the translation of the Company's USD-denominated long-term debt. The unrealised foreign exchange losses are a result of the weakening of the Canadian dollar versus US dollar. It should be noted that the weakening Canadian dollar compared to US dollar is beneficial to the company as sales are made in US dollars and operating costs are incurred in Canadian dollars.
  • Capital expenditures in 2018 were CAN$35.8 million, CAN$29.4 million of which were one-time pre mine construction and development capital costs and the remaining CAN$6.4 million were sustaining capital expenditures related to mine operations.
  • Year end cash position of CAN$30.7 million (2017: CAN$43.1 million) and net working capital of CAN$87.2 million (2017: CAN$96.8 million), with US$50 million revolving credit facility remaining undrawn.

Mountain Province President and CEO Stuart Brown commented: "Financial Year 2018 was Mountain Province's first full year of commercial production at the new Gahcho Kué Mine and we are pleased with its operational performance. The Gahcho Kué Mine has settled down well and has outperformed our initial expectations in terms of throughput and overall diamond production which is an excellent achievement. This trend has continued into 2019 with the mine continuing to perform substantially ahead of expectations. Financial Year 2019 is expected to be another strong year of production. We are confident that we will meet or exceed, our production targets as we have done in the last two years. Along with our Joint Venture Partner, De Beers Canada, we are working on various short and medium-term initiatives which will have a positive impact on the future of the Gahcho Kué Mine. These relate to improvement of production rates and extending the life of mine by including additional JV ore discovered during 2018 and we look forward to updating the market as we complete these tasks later in 2019.

In addition to the JV related improvements the company are also focussing on the wholly-owned Kennady advanced stage diamondiferous kimberlites and near mine exploration opportunities and will update the market on our progress in due course. The company also delivered very good results from its sales process, selling all of its production made available during 2018 which translated into good operating margins, further demonstrating the ability of the ore bodies at the Gahcho Kué Mine to deliver strong free cash flow.

The rough diamond market experienced a relatively difficult finish to the year with price pressure in the smaller and lower quality diamond categories, although we did see a stabilisation of prices towards the end of the year and so far, we have seen a small improvement in the lower quality categories at the start of 2019.

The company's longer-term view of the fundamentals of the diamond business remain positive and combined with the quality of the Gahcho Kué Mine with its long life and high margins, we believe we are well positioned for the future to benefit even more with improved diamond prices. 2019 is a year of innovation and assessing how to improve the returns to shareholders and I am positive that the work we are doing together with De Beers will deliver on this throughout the year ahead."

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