Desmond’s Mountain Province Diamonds aims to sell €279m of loan notes

Mountain Province Diamonds, a Canadian miner in which Dermot Desmond holds a stake of about 24 per cent, is seeking to sell $330 million of (€279 million) of loan notes to pay off debts associated with its share of Gahcho Kue, a diamond mine on the edge of the Arctic circle.

Mountain Province, which owns 49 per cent of the mine, has priced the five-year debt at 8 per cent, and says the offer to institutional investors will close next Monday.

The company, which is chaired by Jonathan Comerford, an associate of Mr Desmond's at IIU Investments, intends to put the cash raised in the loan note sale towards paying off a maxed-out $357 million (€302 million) Gahcho Kue project debt facility. Its lenders have extended waivers on that loan until the end of January.

Mountain Province also owes De Beers, the operator of Gahcho Kue and its joint venture partner on the project, about €32 million to cover "sunken costs" associated with the project.

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Investors

Mountain Province, which is listed in Toronto and on the Nasdaq exchange in the United States, told investors it would use cash on its balance sheet to supplement the loan note sale to pay off these debts.

Moody’s recently assigned the company a B3 so-called “junk bond” rating, which is a common rating for speculative corporate debt for companies like Mountain Province.

The loan notes will be secured on the company’s assets, but will be second in the pecking order for repayment after a new $50 million (€42 million) revolving credit facility it is entering into with its banks.

Gahcho Kue is nearing the end of its first year of production, and is on course, the company says, to surpass 5 million carats of diamonds in the first 10 months of 2017.

It has been touted as one of the most important new diamond mines in the world, and has reserves that could potentially be worth between €10 billion and €20 billion, depending on how prices hold up over the mine’s lifetime.

Mr Desmond first invested in the company over a decade ago, and has underwritten several fund-raisings for Mountain Province in the years since. He has also separately invested in Kenady Diamonds, which has prospects in the Canadian tundra not far from Gahcho Kue.