Mountain Province Diamonds Inc.

Good morning, ladies and gentlemen, and welcome to the Mountain Province Diamonds Incorporated second quarter 2021 earnings conference call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 5th, 2021. I would like to turn the call over to Stuart Brown. Please go ahead.

Thanks very much, Grant. Good day to everyone who has dialed in to listen to our Q2 results call. As ever before I start, I would draw your attention to the legal language covering forward-looking information and indeed the reporting information. Today, Terry and I will deal with the presentation and then the team will be available for any questions you may have. I'm going to jump in straight away and deal with the production results. If you look on slide four, you can see our high-level production stats for the quarter. Obviously, compared to the same quarter last year, we are well ahead in all categories with respect to waste on all tons mined, as well as tons treated, grade, and carrots recovered. The second quarter was also significantly better than our first quarter 2021, where we lost nearly a month of production due to the COVID outbreak in February. Mining productivity rates have improved in the second quarter compared to the first quarter of this year. Our oil production was excellent, allowing us to rebuild our kimberlite ore stockpiles as we emerge from the COVID pandemic. This is pleasing to achieve as it gives us a lot of flexibility and a further buffer should any further COVID or mining issues occur. The process plant has continued to run well all year, and in particular in the second quarter, where approximately 9,000 tons a day was roughly average during the quarter. And just over 800,000 tons were treated, the recovered grade, As per our plan, it continues to perform well at nearly 2.2 carats per ton, which is after the changing of the bottom cutoff, so that was very pleasing. In total for the quarter, we recovered just shy of 1.8 million carats. If we can move ahead to slide five, you can see our quarterly stats on a sequential basis over the prior five quarters. You can see that except for total mining tonnage, The GK mine is now running at the top end of performance since the COVID-19 pandemic began. We've obviously got clearly more work to do to achieve our annual mining rates to get us to an average where we can exceed the 14 million tons per year. But we've got a clear path to normalization of production. And we've had a very good uptake with our vaccination rate. We're running over 80% now. We're trying to catch the stragglers so we can minimize the COVID risk. change the way our workforce is rotated. So we feel we're moving back. And the good weather that we've been having has allowed us to increase our production rates over the past month. But I'd like to hand over to Perry, who will cover the financial performance. Thanks, Stuart.

Good morning, everyone. As Stuart mentioned, I'll cover the financial highlights for the second quarter, which has certainly been our best quarter financially since the start of the COVID pandemic. As normal, all the figures I've mentioned will be in Canadian dollars unless otherwise stated. If you're looking at the webcast presentation, I'll be on slide six. From a financial standpoint, our quarterly sales were very good despite only completing two scheduled sales in Antwerp compared to the three that we originally had planned. We had to cancel our May sale due to the lost production volumes as a result of the February stand down. What carrots we did have available for that sale were pushed into our June sale. Our revenue of $75 billion was more than double that of the second quarter of 2020. We sold 719,000 carrots at an average price of US $73 a carrot compared to 757,000 carrots at only $37 US a carrot in the same quarter in 2020. This is mostly due to rough diamond markets now trading at almost full capacity with strong demand and a significant recovery in rough diamond prices compared to the same period last year. I'll mention that included in our top line revenue is $10.4 million from our share of the upside from the finalization of the Dunebridge diamond purchase agreement with us. This is slightly ahead of our expectations. And their final sale went exceptionally well due to the continued recovery of the rough diamond market. I'm going to turn it back to Stuart in a bit, who's going to cover the market in a bit more detail. But overall, we saw robust price growth across all of our product categories, both of our quarterly sales, as well as the sales we just had completed recently in July. Translating that into financial results, we generated $38 million in adjusted EBITDA at a very positive EBITDA margin of 50%. For the first half of 2021, we reported a total revenue of $129 million and $57 million in EBITDA, which translates into a 44% EBITDA margin. In terms of net income, we reported net income of $22.5 million for the quarter, or 11 cents a share, which comprises the majority of our net income for the first half of the year. If you want to move ahead to slide seven, just in terms of a quick highlight on where we came in as far as cost, cash costs per ton were markedly improved at $97 per ton for the second quarter compared to $125 per ton in the same period in 2020, and $139 per ton in the first quarter of 2021. This is due, obviously, to the continued strong throughput through the plant and fewer COVID-related issues. On a per-carat basis, performance is equally strong given the high grades being recovered. Finally, I'll just turn a bit to our balance sheet. We ended the quarter with $35 million in the bank compared to the $31 million we began the year with. As previously disclosed, we entered into a short-term bridging facility with Doombridge in May 2021 to provide temporary liquidity to make up for the canceled May Diamond sale. We ended up drawing a total of US $31 million in May and June for cash flow purposes, as well as our June interest payments. And following our June sale, began repayments of the term facility right away. We repaid US $11 million of the term facility before the end of the quarter, and just before the end of July, we paid a further US $8.5 million, leaving a current outstanding balance of only US $11.5 million. We anticipate repaying that final U.S. $11.5 million following our next diamond sale in September, which is almost three months ahead of schedule. So based on that, from a liquidity standpoint, we believe we're in good shape. We're currently in discussions with Dunebridge to extend the U.S. $25 million revolving facility, which is up for renewal at the end of September. Following the renewal, the company forecasts having sufficient liquidity going into 2022, and the company will then focus attention on bondholder engagement for our senior notes maturing next December. It's good to see a much better set of financial results and better cash flows as we emerge from COVID. So with that, I'll turn the presentation back over to Stuart.