Mountain Province details US$50 million debt plan

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Mountain Province Diamonds Inc. [MPVD-TSX, NYSE] has released further details of a proposed balance sheet strengthening package that is expected to include the issuance of approximately US$50 million of new debt to an entity controlled by the company’s largest shareholder Dermot Desmond.

On December 29, 2021, the company said it has executed a non-binding term sheet with Desmond for the proposed package, which aims to provide the company with more financial flexibility

Mountain Province is a Canadian diamond mining company. In a joint venture with De Beers Ltd., it operates the world’s largest and richest new diamond mine – Gahcho Kue – located 280 kilometres northeast of Yellowknife.

Gahcho Kue is a fly-in-fly out operation and is expected to produce an average of 4.5 million carats per year (100%) over an initial 12-year lifespan.  Production during the first five years (2017 to 2021) was expected to average 5.4 million carats annually.

De Beers Canada has a 51% stake in the operation, with Mountain Province holding the other 49%.

On Friday, the company said its existing US$25 million first lien revolving facility, which matures on March 31, 2022, is currently undrawn, but is expected to be utilized in the upcoming weeks as the 2022 winter ice road to resupply the Gahcho Kue mine gets under way.

The company said operating in Canada’s far north requires that all major supplies for the year are moved via an ice-road, leading to higher working capital requirements in the first half of the year, and lower requirements in the second half. “Given this, by the end of 2022, the company currently envisages to have an additional US$50 million in cash flow to assist in its broader debt restructure,” the company said in a news release.

Mountain Province has said the proposed arrangement envisions a financing package which would provide US$50 million that is subordinate to existing bonds. This new debt, as currently proposed, would bear an interest rate of 8.0% per annum, paid semi-annually until December 15, 2022.

Following this date, the interest rate would be 2.0% above the margin on the second lien notes then outstanding. The maturity date of this new debt would be December 15, 2027.

As part of the new financing package, 41 million share warrants at an exercise price of 78 cents per share are contemplated to be offered to the provider of the new facility, with the exercise price representing a 13% premium to the 5-day volume weighted average price (VWAP) prior to the execution of the term sheet setting out the terms of the proposed arrangement, subject to TSX and regulatory approval.

These warrants would expire on December 15, 2027. It is expected that the provider of the new facility will be an entity beneficially owned by Desmond.

On Friday, Mountain Province shares were down 8.6% or $0.07 to 74 cents on volume of 760,590. The shares currently trade in a 52-week range of 88 cents and 39.5 cents.


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