Mountain Province Diamonds announces Quarter End results

An aerial view of Gahcho Kué, the world's largest new diamond mine. — Photo courtesy Gahcho Kue

Highlights for 2017 and to date. (All quoted figures in CAD$ unless indicated otherwise)

• For the three months ended June 30, 2017, the Company reported a net income of $7.6 million or $0.05 per share.  The Company conducted two diamond sales during the quarter of which only the second sale, which took place in June, was reported in the statement of comprehensive income.  The proceeds from the first sale in the quarter were credited against the mine construction costs as those diamonds sold were recovered prior to the mine declaring commercial production.
• Mining of overburden, waste rock and ore in the 5034 open pit for the six months ended June 30, 2017 was approximately 16.1 million tonnes.  Ore mined in the first six months totalled 1,551,000 tonnes, with approximately 395,600 tonnes of ore stockpiled at period-end on a 100% basis.
• For the six months ended June 30, 2017, the Gahcho Kué ("GK") Mine treated approximately 1,258,600 tonnes of ore through the process plant and recovered approximately 2,481,200 carats on a 100% basis for an average grade of approximately 1.97 carats/tonne.  This recovered grade is approximately 20% above budget for the six months ended June 30, 2017.  The Company's attributable share of diamond production for the three months ended June 30, 2017 was approximately 790,900 carats, and 1,215,800 carats for the six months ended June 30, 2017.  Production in the second quarter was 86% higher than the first quarter, reflecting the achievement of commercial production effective March 1, 2017.
• In the six months ended June 30, 2017, the Company conducted five sales through its diamond broker based in Antwerp, Belgium for a total of approximately 892,000 carats, which included fancies and specials.  Proceeds of approximately US$71.5 million or an average of US$80 per carat were received.
• Gem and near-gem diamonds for the six months ended June 30, 2017 contributed approximately 96% of the diamond sales proceeds at an average price of US$128 per carat.  The remaining 4% of proceeds came from industrial diamonds at an average price of US$7 per carat.  Gem and near-gem diamonds represented approximately 60% of sales by volume to June 30, 2017.
• Subsequent to quarter end, on July 20, 2017, the Company closed its sixth and largest sale to date at an average realized price of US$72 per carat.  Certain of the fancies and specials from this assortment were accelerated and sold in the fifth sale in June, and including the value of these diamonds the average realized price on the sixth sale assortment was US$87 per carat.  This sale confirmed the continued strong market interest in the Gahcho Kué production, with 10.6 bids received per parcel and 83% of winning bidders being repeat customers.
• Participation at the Company's sales has steadily increased in recent months.  Bids per parcel (approx. 120 parcels per sale) increased from an average of 9.1 over the first three sales to 10.8 over the last three sales.  There is a high level of market interest and competition for Gahcho Kué diamonds with an average of 100 companies bidding each sale.
• The Company has increased 2017 production guidance on a 100% basis by 25% to 5.5 million carats recovered (2.7 million carats on a 49% basis) from 4.4 million carats previously (2.2 million carats on a 49% basis).  Guidance on carats sold for full-year 2017 has accordingly been increased by 20% to 2.4 million carats from 2.0 million previously.

Financial Summary

For the three and six months ended June 30, 2017, the Company reported a net income of $7.6 million or $0.05 per share, and $5.4 million or $0.03 earnings per share, respectively.

The Company undertook five sales of diamonds during the first half 2017 through its broker in Antwerp, Belgium, and a sixth sale was completed in July.  Although the GK Mine declared commercial production on March 1st, the first four sales have been recorded against the mine construction costs rather than as revenue on the Company's statement of comprehensive income as those diamonds sold were all recovered prior to the mine declaring commercial production.

Mountain Province Interim President and CEO David Whittle commented: "Mine operations have performed well with the declaration of commercial production at the beginning of March.  The diamond recovery plant has been running at and above nameplate capacity, and the on-site safety record is commendable.  Price realization remains a challenge as rough diamond markets, while showing some signs of strengthening in recent months, nonetheless continue to be under pressure and are expected to be relatively flat through the balance of the year.  However, on a revenue per tonne basis the mine has performed well, bolstered by a solid overperformance in grade as compared to original plan.  The operating cost structure is also solidly in line with plan as well.  Our ability to generate a 43% gross margin on mine operations in our first quarter of reported results, in spite of the challenges in the rough diamond markets, speaks well to the resiliency of the GK Mine.  And with that grade performance, we are able to increase our production guidance for full-year 2017 to 2.7 million carats, from a previous guidance level of 2.2 million carats."

At June 30, 2017, the Company is subject to maintaining a cash call reserve account balance of approximately US$27.9 million under its project lending facility.  On March 27, 2017, the lenders provided a waiver whereby funding of the amount was deferred to May 31, 2017.  On May 31, 2017, the Company received an additional waiver extension to August 31, 2017. Despite encouraging recent operating and sales results, the Company expects to require further waivers in respect of other reserve account funding requirements during 2017.  The Company is in active discussions with its lending group to defer and realign the reserve account funding requirements to reflect current market conditions.  With the benefit of additional operating and sales results, and subject to continued improvements on both fronts, the Company expects to conclude the realignment of the reserve account funding schedule by late 2017.  Subject to agreement between the Company and lenders, the $65 million cost overrun account in restricted funds in treasury could be used to support reserve account funding.  While good progress is being made, there are no assurances that the lenders will accommodate further waivers or amendments the Company may seek.

Mountain Province Diamonds is a 49% participant with De Beers Canada in the Gahcho Kué diamond mine located in Canada's Northwest Territories.  Gahcho Kué is the world's largest new diamond mine and projected to produce an average of 4.5 million carats a year over a 12-year mine life.

The Gahcho Kué Diamond Mine consists of a cluster of four diamondiferous kimberlites, three of which are being developed and mined under the current mine plan.

Qualified Person

This news release has been prepared under the supervision of Carl G. Verley, P.Geo., who serves as the qualified person under National Instrument 43-101. (Forward-Looking and Cautionary Statements Apply)