Dermot Desmond agrees to put further €63m into diamond company MPD
Most of the world’s gem markets are closed due to the Covid pandemic
Before the pandemic MPD sold its share of diamonds from the Gahcho Kue diamond mine in northern Canada at international gem markets, such as the one in Antwerp. Photograph: Getty Images
Dermot Desmond has agreed to put up a further US$75 million (€63 million) to bail out a listed diamond miner that has suffered a “profound” impact to its operations from coronavirus.
Toronto-listed Mountain Province Diamonds (MPD), where Mr Desmond is the biggest shareholder with 32 per cent, has told its investors that a company linked to the businessman will buy a further US$50 million worth of its diamonds.
This doubles to $100 million the value of the diamond sales agreement between MPD and Mr Desmond’s Dunebridge Worldwide, which agreed to buy the first $50 million tranche in June.
Mr Desmond has also agreed to take on a US$25 million debt held by MPD in a revolving credit facility with a consortium of banks. Last month MPD struck a deal with its banks, Bank of Nova Scotia and Nedbank, to ease the rules surrounding the credit facility.
The company received a waiver in relation to covenants attached to the borrowings such as the requirement for the company to maintain certain debt ratios and cash balances. As part of last month’s bank deal MPD also agreed to cut the debt facility to US$25 million and to accept new covenants, including a bonus ban for executives and the provision of weekly reports from the company to the banks.
It also promised to show progress by the end of this month on a plan to pay back the banks in full by the end of September.
This week MPD told investors it intends to call a shareholders meeting on September 29th to ratify the latest bailout by Mr Desmond, who has agreed to buy the diamonds from MPD at market rates to replenish its decimated income.
His June agreement with MPD included a plan to split any upside with it when he sells on the diamonds.
MPD owns 49 per cent of the huge Gahcho Kue diamond mine inside the Arctic Circle in northern Canada. The rest is owned by the mine’s operator De Beers.
Before the pandemic MPD sold its share of diamonds from the mine at international gem markets, such as the one in Antwerp. However, most of these markets are currently closed due to the pandemic, choking off its income.
“The impact of the Covid-19 pandemic on the diamond industry and, in turn, the company has been profound,” said MPD.
“The support shown by Mr Desmond and the subsequent finalisation of the transactions will be a substantial positive step in stabilising the company and brings more certainty to its future.”
MPD is chaired by Mr Desmond’s long-time associate Jonathan Comerford, and its directors include his son, Brett Desmond. He has been an investor in the Canadian mining scene for more than two decades.
* This article was edited on August 22nd 2020