Mountain Province Diamonds Inc.

good morning ladies and gentlemen and welcome to the mountain province diamonds inc q1 2025 webcast and 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 0 for the operator this call is being recorded on wednesday 14th of may 2025. i would now like to turn the conference over to Mark Wall, CEO. Please go ahead.

Thanks, Andrew. Welcome to everyone who's dialed in to listen to our Q1 2025 results call. My name is Mark Wall, and I'm the President and CEO of the company. Also present on this call is Stephen Thomas, our CFO, and Reid Mackey, our VP of Diamond Sales and Marketing. At the conclusion of this presentation, the team will be available for any questions that you may have. Firstly, I would draw your attention to our cautionary statement regarding forward-looking information. This presentation will be posted on our website for anyone who needs additional time to review this statement. Mountain Province Diamonds produces Canadian diamonds to the highest standards of corporate social responsibility and that is something that we continue to be proud of. We own 49% of the Goucher Quay mine in the Northwest Territories with the De Beers Group, a division of Anglo-American PLC, owning the remaining 51%. Today I will speak to our Q1 2025 results and provide some insights into our operational and financial performance. Following that, Steve, our CFO, will discuss the Q1 financial performance of the company and Reid will comment on the overall diamond market. I will then make some closing remarks to complete the presentation and answer any questions that you might have. I'll start the review of the Q1 results with safety as always, where the Goucher Quay operations have continued lost time injury free and have now worked more than 3.85 million hours without a lost time injury. The total recordable injury frequency rate for quarter one was 2.14, which is an improvement of around 66% from last year. The very challenging winter months are behind us and the operations are now focused on safely navigating the fresh air period which is upon us. I'm now going to run through some highlights from our first quarter. The story of quarter one was very strong operating results with lower grade treated and depressed pricing, which contributed to a low adjusted EBITDA of $6.1 million for the quarter. First turning to the operating side, we saw the process plan continue to perform very well, with total terms traded in Q1 2025 improving by 15% from the same period in 2024. The work completed to stabilise and optimise the process plan continues to deliver strong throughput results. On the all-important mining side, the total tons mined increased by 28% in the quarter when compared to quarter one of 2024. The significant increase in mining rate is the result of a sustained focus on drill and blast efficiency, people efficiency, maintenance efficiency, and short-term planning efforts. During the quarter, the operating team delivered a record performance on total tons mined, which is important in accelerating the waste stripping into the much higher grade NEX ore body. We aim to continue the strong mining performance in order to access the NEX ore body earlier than was planned. Access to the NEX ore body is critical in improving the grade with NEX returning double or in areas triple the grade we are currently processing. I'm pleased to report that the early access to the NEX ore body was achieved and overnight the first ore from NEX was fed into the processing facility. The grade for quarter one was low and this was a major contributor to lower production and revenue. We continue to have confidence in the overall stockpile grade although in quarter one, the stockpile gave us a lower grade than anticipated. This is a very large stockpile, and the grade in the stockpile is an average rather than a contiguous grade. We have begun treating areas of higher grade, although the mineralogy of the ore will reduce the tons able to be treated by the processing facility. So in summary on operation, safety is going very well. Mining and processing are in excellent shape. but the grade of the material treated during quarter one was low. On to the diamond market, Reid will speak in more detail on this. As a general comment, I would say that there are green shoots in the market and that I'm optimistic that the turbulence in the global markets will stabilise as we move through 2025. The announcement a few days ago from De Beers of its intention to close its synthetic brand lightbox highlighted the massive price reductions in the factory-made market and is, I believe, a positive for the rare, high-value natural diamond market. Reid will provide more details as I've said. As previously announced, during quarter one, we saw the closing of the refinancing transactions, which will serve to address the reclamation liabilities owed to De Beers as the operator of the Gatcha Quay mine. provide an immediate injection of capital to address the 2025 near cash flow deficit faced by the company and extend the term of the second lien notes to December of 2027. These were due to mature in December of 2025. Furthermore, we recently announced that our AGM to be held on May 16, shareholders will be asked to pass an ordinary resolution approving a new working capital facility from Jimbridge Worldwide, a related party of the company, in the amount of 33 million Canadian dollars, or the US dollar equivalent amount. In respect of these transactions, for which we received much appreciated support from De Beers and our financing partners, I would like to recognize the continued support of our largest shareholder and debt holder, Mr. Dermot Desmond, who has provided support to the company over many years. There has been a great deal of hard work to optimize the operations and manage costs in a challenging market environment. Access to the high-grade NEX ore body has been achieved early due to record mining performance, and work continues to open up full access to that ore body over the next several months. With that, I will turn over to Steve to take us through the financial results. Steve.

Thank you, Mark, and good morning, everyone. Noting all numbers discussed will be in Canadian dollars unless otherwise stated. The quarter has seen a relatively low volume of carrots sold compared to Q1 2024 with continued constrained pricing, albeit slightly above the price in Q1 2024 and almost identical to the average price achieved across 2024 year. The cost of sales in Q1 2025 are comparatively higher when normalizing per carat sold due to inventory write-downs in the period and the depletion of the oil stockpile, which means previously capitalized costs are amortized and form part of production costs and depreciation charge. The working capital position of the company is markedly different compared to the year end due to several factors, most notably the closure of the refinancing arrangements in March, which saw the reclassification of the second lien loan notes to a long-term liability with a December 2027 term date, and the drawing down of US dollars 20 million from the bridge loan. Although the quarter has seen minimal movement in the closing versus opening USD CAD exchange rate, a realized foreign exchange loss has arisen on the hedges settled in the quarter at rates below the prevailing spot rate. With $45 million less revenue being earned in Q1 2025 and Q1 2024, adjusted EBITDA and cash provided by operating activities for Q1 2025 are consistently $44 million and $41 million respectively lower than Q1 2024 in line with that revenue reduction. Turning first to the balance sheet, As discussed, the material changes in the balance sheet reflect the revised financing arrangements with the recategorization of the second lien loan notes from a short-term to long-term liability and accounting for a US dollar 20 million drawn against the Doombridge credit facility, also described as a short-term liability. Beyond this, Inventories at $213 million have increased by $16 million during Q1 2025. This reflects a $38 million net increase in consumables, reflecting winter road deliveries, a large portion of which being 51 million litres of fuel, less for consumption in the quarter. That increase in consumables is offset by a $22 million reduction in the ore stockpile down to $87 million. And that reflects the reduction in ore tons from 4.1 million tons at the 2024 year end to 3.1 million tons at the quarter end. This reduction is in line with the plan to feed the process plant from the ore stockpile, whilst the mining operation focused entirely on mining waste tons to progress access to the NEX ore body. The value of rough diamonds has stayed relatively flat at $23.7 million at the quarter end, although the volume of goods has reduced from 319,000 carats at the start of the quarter to $268,000 at the quarter end. The increase in the accounts payable balance from $64 million at the start of the year to $112 at the end of Q1 2025 is consistent with the delivery of bulk commodities, which completed on the winter road on March the 28th. The comparable AP figures at Q1 2023 and Q1 2024 were 98 million and 93 million respectively. And extended credit terms on fuel shipments, which would have previously been settled during the winter road delivery in 2023, for example, explains the increase we see at the end of this quarter. In respect of property, plants and equipment, The Q1 2025 balance at $613 million is $25 million above the year-end balance, which reflects a $4 million increase in assets under construction, that being large equipment parts not yet capitalized, and a $20 million net increase in property which reflects $3.5 million invested in sustaining capital, but more so $32 million of capitalized waste activity in respect of any ex-waste material offset by the depreciation in the period. To note that the total value of capitalized waste within the property, plant, and equipment balance is $186 million. The embedded derivative asset at Q1 end at $4.8 million compares to a balance of $6 million at 2024 year end, and that represents the fair value calculated for the prepayment and redemption feature in the second lien loan notes. The decline in value is due primarily to an increase in the applicable discount rate, which reflects increased volatility, reflected in the increased risk-free rate and credit spread discount rates used in the calculation. Turning to current liabilities, I've discussed already the accounts payable balances and reclassification of debt to long-term and the drawn balance on the bridge loan. But the other items of note are income tax payable at $164,000. Although a small figure, that represents a voluntary payment in respect of the mining royalties settled in 2025 paid in order to efficiently preserve tax pools for greater tax relief in 2026 and beyond. The second item to note is the $5.8 million derivative liability, which is reduced by $2.1 million over the quarter. and that represents the fair value of the U.S. $75 million of currency hedges in place at the quarter end through to October 2025, and comparing their respective settlement rates to the forward FX curve. At 2024 year end, there were U.S. $105 million of currency hedges in place with a derived fair value of $7.9 million. As a result of the above components of current assets and current liabilities, we have seen the working capital position increase by $198 million over the quarter to a balance of $78 million. If we normalize for the aforementioned debt reclassification and drawn bridge loan account, the working capital would have otherwise reduced by $28 million, which reflects primarily the increase in the accounts payable balance. In respect of long-term liabilities, the closing rate of the Canadian dollar compared to U.S. has remained relatively flat over the quarter at 1.4387 versus the opening rate of 1.4383, which means the translation of the 227 million U.S. denominated long-term debt results in a minimal unrealized foreign exchange loss of $313,000 in Q1 2025, which compares to an equivalent loss of $6.2 million in Q1 2024. The foreign exchange loss in Q1 2025 that we have experience of $2.8 million is realized, and it reflects the settlement of US dollars 30 million of hedges at rates less than the prevailing spot. The derived fair value of the decommissioning and restoration liability is increased by $1.4 million over the quarter to $85.6 million. And that's because of the decrease in the nominal risk-free interest rate, which reflects the Bank of Canada benchmark 10-year bond yield rate used in that fair value calculation. Turning to cash flow and earnings plus, in Q1, 426,000 carats were sold at an average price of US dollars 72 per carat or 103 Canadian to generate $44 million in turnover. This compares to Q1 2024 when approximately 938,000 carats were sold at an average price of US $70 per carat or 95 Canadian per carat for revenues of $89 million. In Q1 2025, we saw the average price per carat in the March sale at US$81, notably above that for the January sale at US$66 per carat, and the average sale price in the last quarter of 2024 at US$68 per carat. And that increase reflects the quality of the goods sold along with an improvement in market sentiment over those previous quarters. Reid will elaborate more on the general market conditions in his discussion. Production costs at $39.3 million in the quarter are notably above $32.7 million in Q1 2024, reflecting in part the $10 million write-down of rough diamond inventory from cost to net realizable value, which is driven by the constrained pricing in the quarter. However, if normalized for carrots sold, the Q1 2024 compared to Q1 2025 production costs would have been far lower, because in that quarter, the oil stockpile grew by 1.1 million tons, resulting in the capitalization of costs, whereas in Q1 2025, the oil stockpile reduced by 926,000 tons, causing those past capitalized costs to be amortized as a period expense. Depreciation at $23 million for Q125 is approximately $1 million above the comparative figure of $22 million in Q1 2024, reflecting the equivalent impacts as mentioned for production costs, i.e., the value adjustment for inventory and the depletion of the stockpile in the quarter compared to its growth in Q1 2024. The cash costs of production, excluding capitalized stripping for Q1 2025, $109 per carat and $90 per ton of oil, are markedly above the comparative figures of $33 and $51 for Q1 2024. As with production costs, this increase is due to the impact of three major drivers. Firstly, in Q125, we had the $10 million inventory write-down, which was zero in Q124. Secondly, the 926,000 tonne depletion of the oil stockpile compared to its 1.1 million tonne growth in Q124. And thirdly, the respective value of opening and closing inventory feeding production costs, which in Q1 2024 went down. compared to Q1 2025 where they went up. The gap in comparative costs on a per-ton basis widens when viewed on a per-carat basis, as the grade of ore treated in Q1 2025 at 0.82 carats per ton is close to half of the grade at 1.57 carats per ton in Q1 2024. Similarly, The comparative costs over the two quarters inclusive of capitalized stripping increases as Q1 2025 saw $16 million more in capitalized stripping costs than in Q1 2024. In summary, loss from mine operations for Q1 2025 of $22.3 million compared to earnings of $30.4 million in Q1 2024. On the income statement, the other loss of $1.1 million represents the increase in the fair value of the liability, which itself represents the $41 million warrants originally issued as part of the junior credit facility that were changed from an exercise price of US dollars 61 per common share to 20 cents Canadian. As a result of this change to a Canadian dollar-based value, there will no longer be a need to mark to market as these warrants, along with the 10 million warrants issued under the bridge loan, are treated as an equity instrument with fair value established wants on their issuance. The net derivative gain of $815,000 reflects the $2.1 million gain on the outstanding currency derivative hedges as that liability is reduced because the U.S. dollar value of the hedges outstanding has reduced, and they are now pegged against the lower U.S. dollar forward curve. That gain of $2.1 million is offset by the loss on the senior loan note embedded derivative contract due to the change in the discount factors used to derive its fair value. Note that in response to the recent weakening in US dollar value compared to Canadian in April 2025, the company took out a further US dollar 15 million hedge for conversions that will take place in Q1 of 2026. In respect of the foreign exchange movement in the period, as discussed earlier, the loss arising is realized based on those US dollar 30 million hedges that actually settled in the quarter compared to the previous period's unrealized foreign exchange loss of $6.2 million. Deferred income tax recovery at $3.8 million in Q125 compared to a deferred income tax charge of $2.3 million in Q124, reflects the reduction in the deferred tax liability in Q125 due to the scale of the operating loss arising in the period and the previously mentioned voluntary $160,000 tax payment, which delivered approximately $1 million in deferred tax benefit for the future. Cash flows provided by operating activities, including changes in non-cash working capital in Q1 2025, were an outflow of $916,000 compared to an inflow of $39,953,000 for Q1 2024. And that is largely driven by the $45 million lower comparative turnover across the two quarters. Similarly, per the analysis in the MD&A, the adjusted EBITDA in Q1 2025 was $6.1 million versus $50 million for Q1 2024. The resultant EBITDA margin for Q1 2025 based on sales was 14%. compared to 56% for Q1 2024 and an average of 34% for the full year of 2024. The above performance resulted in a net loss after tax for Q1 2025 of $34.4 million compared to a gain of $6.9 million in Q1 2024, a gain driven largely by the comparatively lower sales volume and US dollar selling price. For Q1 2025, the loss per share was $0.16, compared to a gain of $0.03 for Q1 2024. In conclusion, for Q1 2025, although we continue to see good operational performance, as Marcus mentioned, with the mining fleet operating above plan and the high throughput rates in the process plant, it has been a challenging quarter financially with low sales volume and constrained pricing, albeit the price achieved in March sale being better than the average price achieved in the recent past. Having worked through the significant refinancing program in March, We hope at the AGM on this Friday to receive approval for the working capital facility provided through our major shareholder and stalwart supporter, Mr. Desmond. Our focus remains on pushing the operator to access the lucrative NEX ore body, which as Mark has mentioned, is being successful, and whilst performing safely, and of course, focusing on minimizing other costs wherever possible. Thank you for listening, and with that, I will turn the presentation over to Reid Mackey, our VP Diamond Sales and Marketing.