Mountain province extends credit due to “financial difficulties”

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Mountain Province Diamonds, co-owner of the Gahcho Kué diamond mine in the Northwest Territories, 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 to Dunebridge Worldwide, its largest shareholder, in a press release on Monday. It now expires on March 31, 2022.

A revolving credit facility is a flexible form of credit where the borrower is allowed to withdraw, withdraw, or repay money repeatedly until the line of credit expires.

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As a condition of extending the line of credit, Mountain Province fully repaid a separate US $ 33 million loan from Dunebridge that was originally due on December 31.

In their press release, the independent directors of Mountain Province 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 condition and meet “general working capital needs”.

Matthew MacPhail, vice president of business development and technical services, told Cabin Radio that the prepayment of the loan was a “positive update” for the company.

MacPhail said the press release’s reference to the company being in “serious financial difficulty” was a “catch-all statement” to assure shareholders that the transaction was in the best interests of the company, and not simply for a large, enriching shareholder.

Dermot Desmond, owner of Dunebridge Worldwide, owns 33 percent of the shares of Mountain Province.

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MacPhail said the difficulties faced by the company are “nothing major at this time” and similar to those encountered over the past two years following the Covid-19 pandemic.

In May, Stuart Brown, president and CEO of Mountain Province, told Cabin Radio that a 22-day disruption of operations in Gahcho Ku̩ Рtriggered by a Covid-19 outbreak in February Рresulted 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 maintains that things are improving.

According to Mountain Province’s second quarter 2021 financial results, 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 totaled $ 37.9 million for the second quarter of 2021, up $ 10 million from the same period in 2020.

“We have benefited from the increase in rough diamond markets in general as the world continues to emerge from this pandemic,” MacPhail said.

“We are convinced that, barring some sort of extreme resurgence or something from this pandemic, these diamond prices should persist and allow us to maintain this good margin on our production.”

Mountain Province holds a 49 percent stake in Gahcho Kué. De Beers Canada, which owns the remainder, operates the mine.

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