Business

Dermot Desmond-linked diamond mining firm warns on funding as gem sales fall

Finance costs push Canadian miner in which Dermot Desmond is largest shareholder to a net loss

Dermot Desmond is the largest shareholder in Mountain Province Diamonds which has reported falling sales and a net loss after debt financing. Photograph: Cyril Byrne
Dermot Desmond is the largest shareholder in Mountain Province Diamonds which has reported falling sales and a net loss after debt financing. Photograph: Cyril Byrne
Barry J Whyte
Thu Nov 07 2024 - 18:54

Mountain Province Diamonds, a Canadian diamond mining company part-owned by Dermot Desmond, has seen its revenue drop this year, fresh company filings show. That has triggered concern that the company might not be able to fund ongoing operations, requiring it to raise fresh funding in the near future, the filings state.

For the first nine months of this year the company, which jointly owns the Gahcho Kué mine in Canada with diamond industry giant De Beers, had total sales of 215.7 million Canadian dollars (€144.1m) compared to C$248.9 million for the same period last year.

It has recorded earnings from mine operations of C$31.4 million so far this year, less than half the C$76.8 million for the first nine months of 2023. After various costs, including finance costs of C$31.8 million and a foreign exchange hit of C$6.2 million, the business fell to a net loss for the year-to-date of C$18.6 million compared to a profit of C$32.1 million for the same period in 2023.

In the notes to the accounts the directors state that “the company is forecasting a cash flow shortfall during the next 12 months based on management’s expectation of diamond production, sales, prices and costs”.

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It will also have to deal with “the upcoming maturity of the senior secured notes with an outstanding principal amount of US$177 million which mature on December 15th, 2025″, it said.

“The company does not currently believe that sufficient cash flows from operations and cash on hand will be available to discharge the company’s ongoing operational costs” and the senior secured notes as they come due, the directors said.

They warn that a “failure to meet the obligations for cash calls to fund the company’s share of expenditures at the GK Mine may lead to De Beers Canada Inc. enforcing its remedies under the joint venture agreement”. This could result in the “the dilution of the company’s interest in the GK Mine” as well as “cross-default clauses” contained in some of its loans.

Mountain Province will need to raise fresh funding and negotiate with existing lenders to refinance their senior secured debt, they say, “or pursue other options”. They warn that there is no guarantee that either the financing or “other options” will be available.

Dermot Desmond is the largest shareholder in Mountain Province, with about 36 per cent of the shares. He also holds large tranches of the company’s junior debt, having had to step in several times over recent years to support the business through difficult periods in the diamond sector.

In a release accompanying the accounts, company chief executive Mark Wall said the first nine months of the year had been “a period of challenging diamond prices, resulting in an adjusted Ebitda for the period of some C$91 million”.

He said that “while the diamond market has been disappointing during the period, I am optimistic that the price environment will recover during 2025″ and anticipated “a very strong 2026 production year”.

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