Mountain Province Diamonds Announces Full Year and Fourth Quarter 2022 Results

by ahnationtalk on March 23, 202345 Views

TORONTO and NEW YORK, March 22, 2023– Mountain Province Diamonds Inc. (“Mountain Province”, or the “Company”) (TSX: MPVD) (OTCQX: MPVD) today announces its financial and operating results for the fourth quarter (“the Quarter” or “Q4 2022”) and the full year ended December 31, 2022 (“FY 2022”).

All figures are expressed in Canadian dollars unless otherwise noted and are unaudited.

FY 2022 Highlights

  • Adjusted EBITDA1 of $177.2 million, up 31% relative to 2021 (2021: $135.4 million).
  • Total sales revenue at $388.9 million (US$297.3 million) compared to $298.3 million in 2021 (US$237 million: sales revenue in 2021 does not include the ‘upside’ revenue of $10.4m from the Dunebridge agreement), at an average realized value of $146 per carat (US$112) 2021: $94 per carat (US$75).
  • During 2022 the Company repaid US$110 million in debt, US$60 million from operating cash flow and utilizing the US$50 million junior secured term loan credit facility (‘Junior Credit Facility’)
  • In December 2022, the Company completed the refinancing transaction involving the issuance of US$195 million aggregate principal amount of its 9.000% Senior Secured Second Lien Notes due 2025 (‘Notes’), to refinance US$189.2 million aggregate principal amount of the Company’s existing 8.000% Senior Secured Second Lien Notes due 2022 (‘Old Notes’)
  • Significant discovery beside and connected to the Hearne open pit that has potential to transition Gahcho Kué to an underground producer, and potentially increasing mine life.
  • Updated Technical Report filed March 2022 which featured a pre-tax/royalty NPV 7.5% attributable to Mountain Province Diamonds of $1,233 million.

Operational Highlights for Q4 and FY 2022
(all figures reported on a 100% basis unless otherwise stated)

  • 1,621,800 carats recovered during the quarter at an average grade of 1.96 carats per tonne, 7% higher than the comparable quarter (Q4 2021: 1,511,253 carats at 1.86 carats per tonne). 5,519,309 carats recovered during FY 2022 at an average grade of 1.78 carats per tonne, 12% lower than the comparable period (FY 2021: 6,229,042 at 2.02 carats per tonne).
  • 705,924 ore tonnes mined during the quarter, a 31% decrease on the comparable period (Q4 2021: 1,019,671). 4,113,648 ore tonnes mined during FY 2022, a 16% increase from the comparable period (FY 2021: 3,561,417).
  • 828,644 ore tonnes treated during the quarter, a 2% increase on the comparable period (Q4 2021: 813,308). 3,102,219 ore tonnes treated during FY 2022, a 1% increase from the comparable period (FY 2021: 3,082,572).
  • 10,144,844 total tonnes mined during the quarter, a 6% decrease on the comparable period (Q4 2021: 10,812,723). 33,947,188 total tonnes mined during FY 2022, a 4% decrease from the comparable period (FY 2021: 35,447,014).

Q4 and FY 2022 Production Statistics

2022 Q4   

2021 Q4   

YoY Variance

Total tonnes mined (ore and waste)

10,144,844

10,812,723

-6 %

Ore tonnes mined

705,924

1,019,671

-31 %

Ore tonnes treated

828,644

813,308

2 %

Carats recovered

1,621,800

1,511,253

7 %

Carats recovered (49% share)

794,682

740,514

7 %

Recovered grade (carats per tonne)

1.96

1.86

5 %

FY 2022   

FY 2021   

YoY Variance

Total tonnes mined (ore and waste)

33,947,188

35,447,014

-4 %

Ore tonnes mined

4,113,648

3,561,417

16 %

Ore tonnes treated

3,102,219

3,082,572

1 %

Carats recovered

5,519,309

6,229,042

-12 %

Carats recovered (49% share)

2,704,461

3,052,231

-11 %

Recovered grade (carats per tonne)

1.78

2.02

-12 %

Financial Highlights for Q4 2022

  • 758,000 carats sold (Q4 2021: 809,000), with total proceeds of $96.3 million (US$71.3 million) compared to $85.1 million in Q4 2021, (US$67.6 million), at an average realised value of $127 per carat (US$94), Q4 2021: $105 per carat, (US$84).
  • Adjusted EBITDA1 of $23.4 million.
  • Earnings from mine operations of $31.6 million.
  • Cash costs of $160 per tonne treated and $82 per carat recovered, include capitalized stripping costs1.
  • Net income of $9.4 million or $0.04 earnings per share.  Included in the determination of net income for the three months ended December 31, 2022, is an unrealized foreign exchange gain of $5.6 million, on the translation of the Company’s USD-denominated long-term debts. The unrealized foreign exchange gains are a result of the relative strengthening of the Canadian dollar versus the US dollar.

1Cash costs of production, including capitalized stripping costs, and adjusted EBITDA are non-IFRS measures with no standardized meaning prescribed under IFRS. See the Non-IFRS Measures section of the Company’s December 31, 2022 MD&A for explanation and reconciliation.

Financial Highlights for Full Year 2022

  • Total sales revenue at $388.9 million (US$297.3 million) compared to $298.3 million in 2021 (US$237 million sales revenue in 2021 does not include the ‘upside’ revenue of $10.4m from the Dunebridge agreement) at an average realized value of $146 per carat (US$112) 2021: $94 per carat, (US$75).
  • Adjusted EBITDA2 of $177.2 million up 31% (2021: $135.4 million).
  • Earnings from mine operations of $170.5 million (2021: earnings from mine operations $113.7 million).
  • Cash costs of production, including capitalized stripping costs2,3 of $122 per tonne treated (2021: $110 per tonne) and $69 per carat recovered (2021: $55 per carat).
  • Net income of $49.2 million or $0.23 earnings per share (2021: net income $276.2 million or $1.31 earnings per share. In 2021 there was an impairment reversal of $240.6 million, which was included in the net income figure above.) Included in the determination of net income is an unrealized foreign exchange loss of $28.2 million (2021: gain of $2.3 million) on the translation of the Company’s USD-denominated long-term debt. The unrealized foreign exchange loss is a result of the weakening of the Canadian dollar versus US dollar.
  • Capital expenditures were $60.4 million, $49.7 million of which were deferred stripping costs, with the remaining $10.7 million accounting for sustaining capital expenditures related to mine operations.

2 Cash costs of production, including capitalized stripping costs, and Adjusted EBITDA are non-IFRS measures with no standardized meaning prescribed under IFRS.  See the Non-IFRS Measures section of the Company’s December 31, 2022 MD&A for explanation and reconciliation.

3 In FY 2022 a total of 33.9 million tonnes mined, compared to a total of 35.4 million tonnes mined in 2021; a 4% decrease year over year.

Market Highlights for Q4 and Full Year 2022

In Q4 2022, 758,000 carats were sold at an average value of $127 per carat (US$94 per carat) for total proceeds of $96.3 million (US$71.3 million) in comparison to 808,750 carats sold at an average value of $105 per carat (US$84 per carat) for total proceeds of $85.1 million (US$67.6 million) in Q4 2021.

During FY 2022, 2,657,000 carats were sold at an average value of $146 per carat (US$112 per carat) for total proceeds of $388.9 million (US$297.3 million) in comparison to 3,158,429 carats sold at an average value of $94 per carat (US$75 per carat) for total proceeds of $298.3 million (US$237 million: sales revenue in 2021 does not include the ‘upside’ revenue of $10.4m from the Dunebridge agreement in FY 2021).

In 2022 the Company recorded its highest annual revenues since commencement of operations. Price performance was strong, with the Company benefitting from favourable production characteristics in its recovered diamonds and the ability of the Company to capitalize on a positive market price environment, particularly for smaller size diamonds.

The first quarter of 2022 saw exceptional price growth for rough diamonds but uncertainty following Russia’s invasion of Ukraine and extended delays to China’s covid recovery weighed upon market sentiment during Q2 and Q3. The impact of these challenges to the Company’s diamond prices were mitigated by strategically stocking weaker performing diamond categories during this time.

Stability returned to the market during Q4 and the Company saw solid price performance at its final sales of the year and into 2023. Price performance has been particularly positive for smaller sized diamonds which represent greater than 40% of the Company’s production value.

The Company’s rough tenders continue to attract strong competition from a large base of regular customers and a high level of competition is generated for all product segments.

2024 Production Outlook

The Company wishes to provide the following production outlook for 2024. While some additional carats have come into the plan, the aggregate quantity across the Life-of-Mine is not materially different from the NI 43-101 Technical Report filed in March 2022. Work has been done in order to smooth the production profile via mine sequence optimization. The Company will continue to review both 2024, and the entire Life-of-Mine plan in our normal strategic business plan process during 2023 to seek further optimization and improvement. The 2024 production outlook is as follows:

2024: 4.0 million to 4.4 million carats

Mountain Province Diamonds President and CEO Mark Wall commented:

“2022 was a transitional year for the company.  We repaid US$110 million in debt, US$60 million from operating cash flow and utilizing the US$50 million Junior Credit Facility, leading to a significantly improved debt to EBITDA ratio, and refinanced our bonds with a 9% coupon and with no dilution to equity holders.  We also discovered the Hearne Northwest Extension which has led us to review the underground potential of the Gahcho Kué mine, including how the Kennady assets may integrate into this scenario, with the objective of understanding the opportunities that may exist to substantially extend the mine life.

As we move into 2023, we continue to focus on safety, sustainability, and operational performance at the mine level. We’ll continue to optimize our sales pipeline, and focus on our organic growth opportunities at the mine and at Kennady North. On the financial side of things, we are striving to improve our balance sheet by working on reducing debt directionally towards a 1:1 debt to EBITDA ratio to enable a disciplined approach to capital allocation.

We have taken the additional step of providing an outlook for 2024 where we have seen production that was in our study in the low three million carat range substantially improved, and we will continue to review as we work through the planning process.”

Hearne Drilling Update

The Hearne Northwest Extension was discovered in late 2021, when kimberlite measuring 25 meters in a bench face was exposed during routine mining operations. A delineation drilling program was subsequently launched with initial results reported last year (see news release, July 18, 2022). Drilling of the Hearne Northwest Extension as at the end of 2022 totaled 16 drillholes and 5,026 meters. Ten of the sixteen drillholes had significant kimberlite intersections that have been used to model the Hearne Northwest Extension (see news release, November 30, 2022). Phase two drilling started in early 2023 with 13 drillholes planned (5,580 meters total) of which three have been completed. Two drillholes intersected HK and HK transitional kimberlite. Logging, petrographic, mineral chemistry and microdiamond analysis is underway to properly define the HK and TK contacts in the extension and their relationship to the main Hearne kimberlite. Details for the 2023 drilling results are provided in the table below.

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