Mountain Province Diamonds just wrapped up their Q1 2024 earnings call, and amidst the usual market analysis and production updates, a subtle but fascinating detail emerged: the company is sitting on a veritable mountain of ore. This massive stockpile, largely overlooked in the initial coverage of the call, could signal a strategic shift in Mountain Province's operations, one aimed at maximizing carat production in the coming years.

The transcript reveals a dramatic increase in the ore stockpile, growing to an impressive 3.5 million tons by the end of Q1 2024. This represents a staggering 150% increase from the 1.4 million tons held at the end of Q1 2023. It's clear that mining operations are exceeding the processing plant's capacity, allowing the company to accumulate a significant reserve of unprocessed ore.

This strategic stockpiling could be a shrewd maneuver, especially given the recent challenges faced by Mountain Province. 2024 has long been recognized as a potentially difficult year due to mine sequencing and lower anticipated grades. By deliberately building a substantial ore stockpile now, Mountain Province could be laying the groundwork for a dramatic production surge in the years ahead, precisely when the current operational hurdles are expected to diminish.

"The transcript also highlights the ongoing focus on processing plant optimization, with the plant consistently operating above its original nameplate throughput. This suggests that Mountain Province is not just stockpiling ore, but actively preparing to process it efficiently."

The company has also engaged an external engineering firm to review its technical report, specifically targeting increased carat production within the existing life of mine. This investigation, expected to conclude by the end of Q2 2024, could unveil a revised mine plan that leverages the existing ore stockpile to dramatically boost production.

Hypothetical Production Boost and Revenue Impact

Here's where things get truly interesting. Let's hypothesize for a moment. If Mountain Province manages to add, say, two additional years of production at a higher throughput rate using the current stockpile, the impact on their future earnings could be significant. Assuming a conservative estimate of a 10% increase in annual carat production above current projections, the company could potentially generate an additional 1 million carats over those two years.

Even at a moderate price of $80 per carat, that translates to a potential $80 million in additional revenue. This potential revenue surge comes on top of the already strong EBITDA margin of 56% reported in Q1 2024.

Ore Stockpile Growth

The following chart showcases the dramatic growth of Mountain Province's ore stockpile, highlighting the company's strategic approach.

The timing of this potential production boost could also prove advantageous. The diamond market, though facing headwinds in the US and China, shows signs of stabilizing. The impact of G7 sanctions on Russian diamonds is still unfolding, and early indicators suggest that it could create a demand void that Canadian-sourced diamonds are ideally positioned to fill.

Mountain Province's commitment to ethically and sustainably sourced diamonds, further bolstered by blockchain-based chain of custody initiatives, could resonate powerfully with a market increasingly sensitive to diamond origin.

So, is Mountain Province Diamonds quietly building a carat empire? The evidence certainly points in that direction. The strategic stockpiling of ore, coupled with the focus on plant optimization and the review of the mine plan, suggests a calculated strategy to maximize production in the coming years. If successful, this strategy could unlock significant value for the company, potentially transforming Mountain Province from a diamond in the rough into a sparkling gem of the mining world.

"Fun Fact: Did you know that the Gahcho Kué mine, in which Mountain Province holds a 49% stake, is named after a local legend? The story goes that a pair of giant dogs, Gahcho and Kué, once roamed the area, their footprints creating the lakes that dot the region."