Mountain Province Diamonds Announces Third Quarter and Nine Months Ended September 30, 2019 Results and Updates Full Year 2019 Guidance

Press Release

TORONTO and NEW YORK, Nov. 5, 2019 – Mountain Province Diamonds Inc. (“Mountain Province”, or the “Company”) (TSX and NASDAQ: MPVD) today announces its financial and operating results for the third quarter (“the Quarter” or “Q3 2019”) and nine months ended September 30, 2019.  The Company also provides an update to its full year 2019 guidance.  All figures are expressed in Canadian dollars unless otherwise noted.

Revised 2019 guidance

• The Company increases its full year 2019 production guidance from 3.2 – 3.3 million tonnes processed to 3.3 – 3.4 million tonnes processed.
• The Company narrows its full year 2019 production guidance from 6.6 – 6.9 million carats to 6.7 – 6.8 million carats (100% basis).
• The Company also reduces its full year 2019 cost guidance from $110 – $120 per tonne treated to $95 – $105 per tonne treated.
• The Company reiterates its cost guidance of $50 – $54 per carat recovered.

Operational highlights for Q3 2019

• 11,742,138 total tonnes mined, a 1% increase on comparable period (Q3 2018: 11,592,000), and an 8% increase from previous quarter (Q2 2019: 10,865,263).
• 890,325 tonnes of ore treated, a 17% increase from comparable quarter (Q3 2018: 759,000 tonnes), and a 1% increase from previous quarter (Q2 2019: 882,374).
• 1,528,494 carats recovered at an average grade of 1.72 carats per tonne, 16% lower than comparable quarter (Q3 2018: 1,819,000 carats at 2.40 carats per tonne), and 12% lower than the previous quarter (Q2 2019: 1,730,147 carats at 1.96 carats per tonne). As previously announced, the ongoing plant modifications to change the bottom cut off and increase daily throughput have progressed well and the plant is performing above expectations, consistently achieving higher daily throughputs. Extreme and prolonged cold weather conditions encountered during the earlier part of the year caused delays in the mine plan schedule, as access to the planned higher-grade blocks of the orebody were limited. In addition, higher plant throughput capability as a result of the ongoing plant modifications, required the processing of all available ore sources, which mostly consisted of lower grade ore tonnes, all of which are reflected in the lower grades and carats recovered in Q2 and Q3 2019 results. The current quarter (Q4 2019) is trending positively as access to higher grade blocks has been re-established with record carat production achieved in October.

Financial highlights for Q3 2019

• 791,252 carats sold at an average value of $69 per carat (US$52.5 per carat) for total proceeds of $54.8 million (US$41.6 million) in comparison to 788,842 carats sold at an average value of $95 per carat (US$72.5 per carat) for total proceeds of $74.9 million (US$57.2 million) in Q3 2018.
• Adjusted EBITDA¹ amounted to $10.6 million ($37.9 million in Q3 2018).
• Loss from mine operations amounted to $6.1 million (earnings from mine operations $25.2 million in Q3 2018).
• Cash balance as of September 30, 2019 was $28.3 million (post purchase of secured notes payable of $13.2 million) and net working capital of $93.2 million (2018: $92 million), with US$50 million revolving credit facility remaining undrawn.
• During the three months ended September 30, 2019, $13.2 million Canadian dollar equivalent of secured notes payable (US$10 million) were purchased by the Company.
• Cash costs of $90 per tonne treated and $53 per carat recovered, include capitalized stripping costs¹ ($88 per tonne treated and $37 per carat recovered in Q3 2018).
• Net loss was $25.8 million or $0.12 loss per share (net income $17.5 million or $0.08 earnings per shared in Q3 2018).  Included in the determination of net loss for the three months ended September 30, 2019 are unrealized foreign exchange losses of $3.1 million, on the translation of the Company’s USD-denominated long-term debt. The unrealized foreign exchange losses are a result of the relative weakening of the Canadian dollar versus the US dollar in the quarter.

Cash costs of production, including capitalized stripping costs, and adjusted EBITDA are non-IFRS measures with no standardized meaning prescribed under IFRS.  See the Non-IFRS Measures section of the Company’s September 30, 2019 MD&A for explanation and reconciliation.

Operational highlights for the nine months ended September 30, 2019

• 32.1 million total tonnes mined, 7% increase on comparable period (September 30, 2018: 30.1 million tonnes).
• 2,644,000 tonnes of ore treated, 8% increase from comparable period (September 30, 2018: 2,443,000 tonnes).
• 4,843,000 carats recovered at an average grade of 1.83 carats per tonne, (September 30, 2018: 5,391,000 carats and 2.21 carats per tonne). The grade variance year-over-year is primarily due to the mining and processing of lower grade ore tonnes from the 5034 South West Corridor (SWC), in addition to larger volumes of ore tonnes mined and treated from the 5034 Center Lobe, which is the lowest grade part of the 5034 kimberlite. Weather and equipment related challenges faced during the winter months further affected the mine sequencing for 2019, however, the shortfall in ore tonnes mined for the year will be recovered in 2019, with the ability to feed the plant with higher grade ore for the remainder of the year.

Financial highlights for the nine months ended September 30, 2019

• Total sales revenue of $211 million (US$159 million) compared to $240 million in 2018 (US$186 million) at an average realised value of $84 per carat (US$63) 2018: $99 per carat, (US$77).
• Adjusted EBITDA² of $69.4 million down 38% (2018: $112.5 million).
• Earnings from mine operations down 68% to $21.8 million (2018: $68.3 million).
• Cash costs of production, including capitalized stripping costs² of $103 per tonne treated (2018: $94 per tonne) but lower than our guidance of $110–$120 per tonne, and $56 per carat recovered (2018: $42 per carat).
• $13.2 million Canadian dollar equivalent of secured notes payable (US$10 million) were purchased by the Company.
• Net loss was $13.0 million or $0.06 loss per share (2018: net income $11.2 million or $0.06 earnings per share). Included in the determination of net loss for the nine months ended September 30, 2019 are unrealized foreign exchange gains of $13 million, on the translation of the Company’s USD-denominated long-term debt. The unrealized foreign exchange gains are a result of the strengthening of the Canadian dollar versus US dollar.
• Capital expenditures were $25 million, $19.4 million of which were deferred stripping costs, with the remaining $5.6 million accounting for sustaining capital expenditures related to mine operations.

Market highlights for the nine months ended September 30, 2019

The Company’s year to date sales results are based on seven full sales and partial payment received for sale #8, due to timing of the last sale in relation to the close of Q3 2019 financial reporting period.  Full payment for sale #8 has been received and the remaining balance will be reflected in the sales results in Q4 2019.

The Company’s medium to long term outlook for rough diamonds remains positive.  The major producers have reported lower levels of sales in recent months, and this is helping normalise inventory levels in the cutting centers.  In addition, anticipated mine closures over the next 12 – 18 months should also help improve the supply and demand balance in the market.  More importantly, consumer confidence and spending, particularly in the US, which makes up for 40 – 50% of the overall diamond jewelry market, is still strong.

Year to date summary

The Company’s production results reflect 32 million total tonnes mined, 7% higher than the same period last year.  Total carats recovered and grade were 10% and 17% lower than the same period last year, slightly below the Company’s expectations. The lower grade and carats recovered year to date, as stated in previous announcements, are driven by the grade and carats associated with the source of ore feed for each period.  The lower grade and carats recovered in 2019, is primarily due to the mining and processing of lower grade ore tonnes from the 5034 South West Corridor (SWC), in addition to larger volumes of ore tonnes mined and treated from the 5034 Center Lobe, which is the lowest grade part of the 5034 kimberlite.  Weather and equipment related challenges faced during the winter months further affected the mine sequencing for 2019 and limited the operations ability to optimize the blend of the feed to the plant.  The shortfall in higher grade and quality ore tonnes mined for the year will be recovered in 2019, with the ability to feed the plant with higher grade ore.

Year to date, the plant has treated 2,644,000 tonnes, 8% higher than 2,443,000 tonnes treated in the comparable period last year.  Year to date, the plant has produced over 4.8 million carats at an average grade of 1.83 carats per tonne, 10% and 17% lower respectively in comparison to 5.4 million carats at an average grade of 2.21 carats per tonnes during the same period last year, and slightly below the Company’s plans at September 30^th, 2019.  Lower grades were expected in 2019 due to mine sequencing and ongoing plant modifications, but weather and equipment related delays encountered during the winter months caused unforeseen changes in mining operations which limited access to higher grade ore blocks and put additional pressure on grade performance.  Despite these challenges, and as a result of higher mining tonnes and plant throughput, the Company fully expects to deliver its guidance of 6.7 – 6.8 million carats for fiscal year 2019.

The financial results are in line with the Company’s expectations, with cash costs coming in at $103 per tonne treated and $56 per carat recovered in comparison to the full year 2019 cost guidance of $110 – $120 per tonne treated and $50 – $54 per carat recovered. Year to date costs per tonne treated are below the guidance range.  However, cost per carat recovered is slightly higher than 2019 cost guidance, and mainly due to lower grades achieved in Q3 2019.

Mountain Province President and CEO Stuart Brown commented:

“2019 was always going to be a difficult year in the Life of Mine Plan due to the fact that we were largely mining the lower grade and quality areas of Hearne and 5034 South West Corridor (SWC).  Operational delays encountered in the first half of the year further impacted our ability to find a better blend of feed to the plant as shown by grade underperformance year to date.  Despite this we expect 2019 to finish ahead of expectations and achieve all our guidance metrics.  With the exception of the grade for the most recent quarter, GK is performing to plan and all other mining and processing metrics are trending higher on a year over year basis.  The GK mine has extracted 7% more total tonnes and the plant has treated 8% more tonnes than what was achieved in the same period last year.  Q4 2019 is also trending positively, as access to the higher-grade blocks of the orebody has been re-established.

The Company’s diamond sales were in line with expectations considering the expected poorer product mix; which is a creditable performance given the challenging rough diamond market.  The rough diamond market remains tight. The Company’s medium to long-term view of the market remains positive. The major producers have seen reduced levels of sales in their recent rough diamond sales events and this, together with the closure of older mines, should have a positive effect on the supply side of the market in 2020 and beyond and should help to restore confidence across the diamond pipeline. At Mountain Province Diamonds, the focus of our efforts will be the continuous improvement of our operations and maximizing free cash flow generation.”

Gahcho Kué Mine Operations

The following table summarizes key operating statistics for the Gahcho Kué Mine (“GK mine”) in the three and nine months ended September 30, 2019 and 2018.

Read More: http://www.mountainprovince.com/2019-11-05-Mountain-Province-Diamonds-Announces-Third-Quarter-and-Nine-Months-Ended-September-30-2019-Results-and-Updates-Full-Year-2019-Guidance

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