Mountain Province in Chow Tai Fook diamond deal

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Mountain Province Diamonds Inc. [MPVD-TSX, NYSE] has entered into a supply deal with Hong Kong Stock Exchange-listed Chow Tai Fook Jewellery Group Ltd., one of the world’s largest and most respected jewellery retailers.

Under the terms of the supply deal, Mountain Province will provide Chow Tai Fook with a select range of rough diamonds over a one-year, renewable term.

Chow Tai Fook has been a De Beers DTC Sightholder, a Rio Tinto Plc [RIO-NYSE]  Select Diamantaire, and an ALROSA Alliance member since 1993, 2009 and 2012, respectively, and is now partnering with Mountain Province to further secure reliable supplies of rough diamonds, Chow Tai Fook said in a news release.

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%.

Aside from the deal with Chow Tai Fook, Mountain Province also announced the results of its most recent diamond sale, which closed on February 25, 2022 in Antwerp, Belgium. The company said total sales of 322,547 carats were achieved for total proceeds of $52.7 million, resulting in an average value of $163 per carat.

Adjusting for mix of goods sole, this result represents a run-of-mine price of $160 per carat, a new high-water mark for the company since the inception of sales of Gahcho Kue goods, and which incorporates a 13% indicative market price increase relative to the company’s first sale of the year, which closed on January 21, 2022.

“We are extremely proud to announce the formalisation of a supply agreement with Chow Tai Fook,’’ said Reid Mackie, Mountain Province’s Vice-President & Head of Sales and Marketing.

“This is an exciting opportunity for us to partner with a recognised industry leader, known for its discerning approach to diamond sourcing, unwavering focus on production excellence, and extensive retail network across Asia and the United States,’’ he said. “Mountain Province looks forward to building a strong and successful relationship with Chow Tai Fook.

News of the supply agreement was released after the close of trading March 1, 2022, when Mountain Province shares closed at 70 cents, down 4.11% or $0.03 in light trading volume. The shares currently trade in a 52-week range of 88 cents and 39.5 cents.

When releasing its forecasts this year, Mountain Province said its 2022 guidance demonstrates that despite the risks, impacts and costs associated with the ongoing COVID-19 pandemic, Gahcho Kue continues to generate positive free cash flow, enhanced further by the strong rough diamond market.’’

According to the latest forecast, Mountain Province expects to recover 6.3 million to 6.7 million carats this year at a cost of $64 to $68 recovered

 


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