Mountain Province Diamonds Inc.

Also note that this call is being recorded on Wednesday, August 13th, 2025. I would now like to turn the conference over to Mr. Mark Wall, President and CEO. Please go ahead, sir.

Thank you, Sylvie. Good day to everyone who's dialed in to listen to our Q2 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 Jenny Lee, our Financial Controller. Reid, our head of diamond sales and marketing, is not on today's call, but we've incorporated his thoughts on the market into our presentation today. At the conclusion of this presentation, we will be available for any questions that you may have. Firstly, I'd like to 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 Gacho Quay mine in the Northwest Territories, with De Beers, a division of Anglo-American PLC, owning the remaining 51%. Today, I'll speak to our Q2 2025 results and provide some insights into our plan as we move through 2025. Following that, Steve will discuss the Q2 financial performance of the company and I'll comment on the overall diamond market and then make some closing remarks and answer any questions that you may have. The summary of what I will cover is that there has been a laser focus at the operations on safety, production and costs, while the grade has been lower during the treatment of stockpiles and the diamond market has been weak. Starting with safety, the Goucher Clay operations have continued the strong safety performance of the first quarter and an overall improvement in safety at the operations. The total recordable injury frequency rate for half one of 2025 was 2.13, which is considerably lower than the H1 result of 4.38 for the same period in 2024. and massively down from the 14.62 result in 2022. Safety continues to be a key area of focus at the operations and efforts in this area will continue. Part one is a really challenging time at the operations with the extreme temperatures of quarter one, the ice road season to replenish the mine, and then the fresh air period where wet and slippery roads must be safely managed. We've navigated these periods and we will continue the focus for the remainder of the year. On the production side, both quarter two and the whole of half one of 2025 saw strong operational performance. On processing, the combination of the overall availability and the utilization of that availability for the processing facility was 82.5%. which is a significant improvement from past years. Looking back to the 2020 era, the OPU was 76.7% for the same period, and in 2021 was 69.2% for the same period. A focused effort on process plant stability through 2023 saw us get to 81.5% in H1 of 2024, and the continued improvement is the result that we're looking to generate. That translated into 1.8 million tons of ore processed, which is a record for the mine in H1. The focus on optimizing the operating time of the processing facility will continue through the rest of the year. Onto mining, where there's been an intense focus on mining optimization. Small improvements in equipment refueling, workforce planning, road management, together with other initiatives, delivered strong tons moved for H1 of 2025. We have beat our budget for total tons moved, which is steadily gaining us access to the high-grade 5034 NEX ore body. A strong focus on mobile maintenance delivered equipment availability that enabled the mining operations team to deliver the results that they did in H1. The grade of ore treated is a less positive story for H1. We were primarily treating ore from stockpile during half one as planned. This large stockpile is assigned a single grade number, and we know that geostatistically, the grade will vary in different areas of the stockpile. During H1, we averaged 0.81 carats per ton, which is down 44% from the same period in 2024 and down 54% from the same period in 2023. The Tuzo stockpile was expected to be low grade, although the grade performed lower than planned. The grade was helped by earlier than planned access to some transitional ore from the 5034 MEX ore body. During quarter three, we steadily ramp up NEX production with approximately 140,000 tons in August and 275,000 tons in September. NEX tons are expected to return to the 100,000 ton range in October and then back up to the 270,000 ton range going forward. We're working on increasing the October 5034 NEX tons through further improvement in mining efficiency. But to sum all of that up, safety is going well, processing is going well, mining is going well, while grade in H1 was definitely a challenge. We have some lower-grade Tuzo in the mix over the next few months, and then we're planning to treat mostly 5034 NEX ore. On the diamond market, the market remains really challenging. We were seeing some early positive signs. The recent US tariffs have added a great deal of complexity, and we will continue to assess the impact of US tariffs on the diamond market. Overall, I remain optimistic the market will stabilize, and I'll speak to this in more detail in a few moments. On liquidity, during H1, we were again supported with short-term liquidity from our largest shareholder, Mr. Dermot Desmond, during a period of lower grades and the challenging diamond price environment that I've mentioned. The company's very grateful to Mr. Desmond for his continued support of the company. In short, we're in a strong position operationally, and there has been tremendous progress so far in 2025, and we continue to look forward to the market improving. On cost, there continues to be significant focus on cost management. I will say that drawing from the stockpile has impacted production costs due to the release of previously capitalized costs in building that stockpile. Steve will cover this in more detail in a few moments. On a top line basis, we've mined more tons than planned and maintenance costs to deliver the equipment availability to achieve this have gone up. We're tracking in the range of our budgeted costs for the year as we continue to look for savings in all areas. Our focus will continue to be on the things we can control, which is safety and operational performance. With that, I'll turn the call over to Steve to take us through the financial results.

Please unmute, Mr. Thomas. Steve. Okay, while we wait for Steve to join, I will start off.

So I'll start with analysis of the revenue and the significant impact in the first half of this year that diamonds sold being sourced from the stockpile. and prevailing market price has on revenue compared to the same time last year. During Q2 2025, we sold approximately 26% less carrots than in Q2 2024, and at $65 US per carrot versus $74 US per carrot a year ago, resulting in $20 million Canadian dollars lower revenue than achieved in Q2 2024. For the first six months of 2025, referred to as H1 2025, 44% less carrots were sold than in the first half of 2024, with the average selling price of US $68 per carrot compared to US $72 per carrot in the first half of 2024. Comparative revenue is US $50 million or Canadian $65 million being 45% lower. This significant comparative revenue reduction impacts all financial results through the income statement and cash flow statement and the financing measures we have necessarily taken to support the balance sheet. So we just confirmed, you can hear me okay?

Mark, I apologize. I'll take over. Thank you for doing that. Picking up, the market price also impacts the reported cost of sales and non-cash adjustments to the carrying value of diamond inventory, feeding into production costs and the depreciation charge in the quarter and the first six months of the year. Also, during this period, with ore treated being drawn from the ore stockpile as we mine waste tons to access the NEX ore body, the depletion of the stockpile and resulting expensing of previously capitalized costs increases the comparative cost of sales compared to Q2 2024 and H1 2024 when the ore stockpile was growing. The resultant loss from mine operations for Q2 2025 compounds the loss incurred in Q1, resulting in a loss for the first six months of the year of $75 million, compared to a gain of 42 in the first six months of 2024. Not surprisingly, the working capital position of the company has deteriorated during Q2 2025, And although materially better than the position at the 2024 year end, the major changes in the short-term debt recognized in those comparative periods skews the comparative results. The second quarter has seen weakening of the US dollar compared to Canadian, which was flat in the first quarter of 2025. resulting in a significant unrealized foreign exchange gain in Q2 and the resulting gain for the first six months of the year. Adjusting for this and other impacts, adjusted EBITDA for the first three and six months ending June 2025 is notably below the comparative three and six month periods in 2024. being marginally negative in Q2 2025, but positive for the first six months of 2025. Cash flow from operating activities was a significant outflow in Q2 2025, albeit lower than that arising in Q2 2024. But the negative outflow across the first six months of 2025 compares to a small positive inflow for the first six months of 2024. The financial results reflecting continued low selling price and lower production contrast with the performance of the process plant and mining fleet throughout Q2 2025 and the first half of the year, being above their comparative 2024 periods, albeit, as Mark has discussed, with lower oil rates treated as it is sourced from the oil stockpile. Turning to the balance sheet, Given the relatively lower revenue in the heavy spending period of the year, the cash balance has decreased by approximately $5 million over the quarter and $10 million year-to-date to end at $1.7 million. Despite the injection of US dollars 30 million under a bridge credit facility, and the equivalent of Canadian 33 million made available by our related party, Doombridge. The outflow of cash in Q2 2025 reflects the $22.7 million reduction in the accounts payable balance, which itself peaks at the end of the first quarter in respect of winter road deliveries made in that quarter. The net derivative asset comprises the currency derivative contracts for hedges in place at the quarter end valued at $579,000, which at the year end was a liability of $7.9 million. And it also includes the embedded derivative asset representing the early repayment feature within the second lien loan notes, which itself is valued at $981,000 at Q2 end, compared to the year end value of $6.1 million. The increase in the value of the currency derivative contracts in respect of the U.S. hedges has arisen as the U.S. dollar has weakened during the first half of this year. Conversely, the reduction in the calculated fair value of the embedded derivative contract associated with the second lien loan notes reflects the increase in the discount factor used to derive its fair value due to the increase in the assessed credit spread on those notes. Inventories at $167 million have decreased by $29.5 million compared to the year-end balance. This is due primarily to a $55 million reduction in the comparative value of the oil stockpile, for which the tons held at 100% level have reduced by 1.7 million tons, as the operation is focused on mining waste material from the NEX oil body. There has also been a decrease in the value of rough diamond in inventory, for which the volume of carrots on hand has decreased by just 40,000 since the year end. However, the value per carrot is necessarily reflected at the lower of net realizable value and cost and has seen a cumulative write-down of $27.3 million over the first half of the year. This reflects the lower sales price currently being achieved. For supplies inventory, although reduced by $5 million over the quarter due to the net consumption of the bulk goods, it is up by $32 million compared to the year-end balance of $64 million, reflecting the delivery of all bulk consumables on the winter road. In respect of property plant and equipment, The Q2 2025 balance of 625 million is up 13 million over the quarter and 38 million above the year-end balance, reflecting primarily a net increase in property which comprises a $9 million invested in sustaining capital and an increase of $64 million of capitalized waste activity in respect of any ex-waste material, less the depreciation that has occurred on that waste balance. The total value of capitalized waste within property, plant and equipment is $211 million at Q2 period end compared to $160 million at the 2024 year end. For current liabilities, the accounts payable balance at $89 million is down from its peak of 112 at Q1 2025 end when the majority of winter road goods have been delivered but of course up from the year-end balance, as those payments are still being settled per credit terms on certain items such as fuel. To note that the AP balance also includes approximately 12 million Canadian of accrued interest on the senior secured notes, which the lenders agreed to forego until settlement in June 2026. This interest was previously paid every six months, so it would not appear in the comparable AP balance at June 2024 or the 2024 year end. For the secured note payable balance, as discussed in Q1 earnings call, that debt is now reclassified as long-term compared to current at the year end, given the extension of the term settlement date to December 2027. As mentioned in my opening remarks, utilization of the US dollar 40 million bridge credit facility, which increased from 20 million utilized in Q1 to 30 million during Q2, has since the Q2 period end increased by a further $10 million per our recent press announcement issued on July the 29th. Q2 also saw the finalization of terms for a working capital facility, which was approved at our AGM on May the 16th, and total funds of US $23.6 million were drawn in mid-May. These two financing provided critical liquidity during a low revenue period and when cash flows are significant to settle winter road obligations. The value of the US dollar denominated loans, as with the second leading loan notes and junior credit facility, are valued in Canadian dollars based on the closing period rate. And with the strengthening of the Canadian dollar, this has tended to lower their reported value compared to the start of the year or at the start of the quarter. The derivative liability reported at the year end in Q1 2025, which represents the fair value of the USA currency hedges in place, is now reported as a derivative asset due to the aforementioned strengthening of the Canadian dollar over the quarter. And those hedges to be settled in an average settlement rate of 1.36 across the remaining US dollar 45 million hedges we have in place. The fair value of the current and long-term components of the decommissioning and restoration liability has seen little movement over the three and six month period, with the risk-free interest rate used in the fair value calculation at 3.3%, being close to the 3% used at Q1 2025 and 3.2% used in the fair value calculation at the year end. The resultant change in the value of net current assets and current liabilities during the three and six months ending Q2 2025 results in the working capital position decreasing by $73 million during Q2 2025. Although it is $125 million greater than at the 2024 year end, if that balance were normalized for the reclassification of the second lien loan notes from short to long-term debt, This would equate to a reduction in working capital compared to the year-end normalized of $135 million, reflecting in large part the injection of $74 million of short-term debt for which the cash has been utilized to meet operational needs. In respect of the long-term liabilities being the U.S. denominated senior secured notes, junior credit facility, the strengthening of the CAD for the U.S., as mentioned, from 1.439 at Q1 2025 to 1.36 at Q2 2025 has decreased those Canadian reported values. This effect has overridden the growth in the US dollar outstanding balances that arises as we now accrue for the unpaid interest on the second lien loan notes since the start of this year and continue to accrue for interest in respect of the Doombridge Junior Credit Facility. The net result is a non-cash, unrealized foreign exchange gain of $22 million in Q2 and $21.5 million since the start of the year. Turning now to earnings plus, I've outlined in my opening remarks the revenue performance in the three and six months to Q2, so we'll not repeat. But in summary, for the two sales in Q2, U.S. dollar price remained low, compounding the impact of lower volume of carrots sold as all treated was sourced from the ore stockpile at relatively low grade. And Mark will provide a brief overview of current market conditions shortly. To note that in Q2 2025, $1.2 million in other income comprises Mountain Provinces share of a grant received from the government of the Northwest Territories, plus a fee charged by the company for selling goods for De Beers. The loss of 1.1 million in Q2 2024 is the change in the fair value of the warrants granted under the junior credit facility. That fair value process will no longer be required as the warrants were modified in Q1 2025 to be priced in Canadian dollars and recorded as an equity instrument rather than an embedded liability. Production costs at $53.6 million in Q2 2025 is almost double $27 million incurred in Q2 2024. on when normalized for carrots sold is almost 2.7 times higher. Production for the six months ending Q2 at $92.9 million compared to $59.7 million for the six months ending Q2 2024, which again, when normalized for carrots sold, are approximately 2.5 times higher. These significant differences reflect the $18 million charge for writing down the rough diamond inventory from cost to lower net realizable value, and secondly, the fact that in the first six months of 2024, the ore stockpile grew by 1.1 million tons, or 50%, whereas in 2025, it shrank by 1.7 million tons, or 41%, resulting in the release of a significant proportion of the costs previously capitalized when the stockpile was growing, which tended to lower production costs reported in those periods. Depreciation at $27.5 million for Q2 2025 is $13 million above the comparative figure of $14.3 million in Q2 2024. And for the equivalent H-125 period, at $50.6 million versus $36.3 million in 2024. Again, these increases reflect the equivalent impacts as mentioned for production costs, i.e., a $10 million value adjustment for diamond inventory and depreciation costs no longer reporting to the stockpile during a period of depletion in H1 2025. The cash costs of production excluding capitalized stripping for the six months ending Q2 2025 at $114 per carat and $93 per ton of oil are markedly above the comparative figures of $48 and $69 for Q2 2024. This is due to the aforementioned major driver of the substantial depletion of the oil stockpile in the first half of 2025 compared to its growth in 2024, and the respective value of opening and closing inventory, feeding production costs, which in the first half of 2024 went down, whereas in H1 of 2025 they went up. The above differences in comparative costs on a per tonne and per carat basis widen when including capitalized stripping, as H1 2025 capitalized stripping costs were 30.6 million higher than in the comparative H1 2024. And the effect of this during H1 will change to push the full year dollar cost per ton and dollar cost per carat towards the top end of guidance. Financing expenses for Q2 2025 and H1 2025 at 14.5 million and 24.6 million respectively are as expected above the 2024 comparable periods. And this reflects the increase in the interest charge in respect of the junior credit facility as the accrued interest on that balance compounds. And also the inclusion of interest and deferred charges associated with the new bridge loan and working capital facility. Turning to the net derivative gain in Q2 of $2.5 million, that reflects the $6 million gain on the currency derivative hedges which have reduced as the U.S. dollar value is pegged against a lower U.S. dollar forward curve. And that's offset by a $3.5 million loss on the embedded derivative contract due to the change in discount factors used in its fair value calculation. In respect of foreign exchange movements in Q225, These comprise a realized loss of $1.4 million on settled hedges, offset by an unrealized foreign exchange gain of $21.9 million as the U.S. dollar has weakened. Turning briefly to the deferred income tax recovery, it's $7.3 million in Q2 2025 and $11 million for H1 of 2025. That compares to a deferred income tax charge of $0.8 million in Q2 2024 and $3.1 million for H1 of 2024, reflecting the reduction in the deferred tax liability due to the scale of the aforementioned operating losses arising in 2025 and a voluntary $160,000 payment in Q1 which itself delivered a $1 million deferred tax benefit in relation to the tax pools. The above results in loss from operations for Q2 2025 of $52.6 million compared to a gain of 12 million in Q2 2024. And for H1 2025, a loss of $74.9 million compared to a gain of $42.4 million up to Q2 2024. Selling, general, and admin expenses for both the three and six months ending Q2 2025 are below the comparative periods in 2024, in line with cost control efforts. Cash flows provided by operating activities, including changes in non-cash working capital for Q2 2025, saw an outflow of $27 million compared to an outflow of $35 million for Q2 2024. The injection of $47 million of funds in the period supported the closing cash balance at $1.7 million at Q2 2025 end and compares to the opening balance of $6.7 million. For the analysis in the MD&A adjusted EBITDA for the six months ending Q2 2025 was $3.9 million with a margin of only 5%. versus $74 million and a margin of 51% for H1 2024. Overall, a net loss after tax for Q2 2025 of 37.7 million and 72.1 million for the first half of the year, compared to a loss of 6.5 million for Q2 2024, and a gain of $340,000 for the first half of 2024, largely due to the comparatively lower sales volume and price which in turn impacted reported cost of sales due to the inventory valuation adjustments I set out. For Q2 2025, the loss per share was 18 cents and for the first half of the year, a loss of 34 cents compared to a loss of 3 cents for Q2 2024 and zero for H1 2024. In conclusion, Q2 2025 has seen a continuance of a challenging market with constrained price achieved and reduced production volumes available for sale while we mine through the NEX waste material. Despite these results, as Mark has outlined, the mine is performing beyond historical records and positioned to capitalize on the move into the richer NEXO body and more robust future selling price. Thank you for listening. And with that, I will turn the presentation back to Mark. Mark.

Thanks, Steve. With input provided from our VP, Diamond Sales and Marketing, Reid Mackey, I'll make the following general comments on the diamond market. Overarching industry sentiment is one of immediate caution against the evolving tariff backdrop, with some positive signs of consumer demand in key markets to support price recovery in the medium term. Tariff-related concerns affected inventory strategies and diamond purchasing behavior, including spiking imports to the US at the start of the quarter. The industry is now navigating the longer-term impacts of tariffs across key production and manufacturing centers, which are under different rates. This ongoing uncertainty, together with the high price of gold, continue to impact decision-making in rough diamond purchasing, polishing, and jewelry manufacturing. Rough diamond production remains steady. as the major producers still appear to be actively managing supply to protect pricing. Importantly, for medium-term price outlook, 2025 global rough diamond production is forecast to be at its lowest level since the late 1980s, a metric that has historically preceded rough diamond price recovery. In the midstream, manufacturers and retailers purchased conservatively in Q2, awaiting clarity on tariff impacts, but continued buying to meet their specific needs. We saw the impacts of this on pricing with restrained diamond price recovery in Q2. Larger sizes saw more demand, while smaller sizes saw price declines. By the end of the quarter, prices had largely stabilized, with supply scarcity continuing to support pricing. Luxury and retail brands continue to demonstrate resilience downstream, reporting solid results for sales of natural diamond jewelry. Fine jewelers continue to support perceptions around natural diamonds. Recently, initiatives that support luxury consumers' desire for exclusivity, brand recognition and authenticity are being revived, including ideas like physically marking natural diamonds to allow consumers to visually identify natural diamonds by themselves. Consumer outlook is mixed, but a positive forecast is maintained for the key U.S. and Indian retail markets, while a subdued recovery continues in China. At industry events like the JCK show in Las Vegas in June, natural diamonds were regaining ground, while lab-grown options are increasingly trending towards lower-value fashion use. Price divergence continues, with natural diamonds stabilizing or gaining while prices for lab-grown declined due to oversupply. Post Q2, recent US tariff barriers enacted against India are expected to impact the polished diamond sector there in the short term. The key to its recovery will be the deployment of nimble logistics strategies by Indian manufacturers to meet US retailer demand ahead of the all-important holiday season in Q4. So just returning to the overall results at the midpoint of 2024, we've continued to focus on safety performance and achieved the lowest H1 TRIFR so far at the operations. We've continued to focus on processing plan initiatives that have now resulted in the process plan operating generally above the original nameplate for throughput. We focused on mining efficiency, maintenance, and waste stripping to the all-important 5034 NEX ore body. We've retained our focus on overall cost control, noting that the impact of drawing from stockpile has had on our costs in the short term. We look forward to some stabilization in the market in order to be able to leverage our higher production from Q4 through 2026. Thanks for your time. And Steve and I are now available for any questions that you may have.

Thank you, Mr. Wall. Ladies and gentlemen, if you do have any questions from the phone, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. If on a speakerphone, you will need to lift the handset first. Once again, if you do have any questions from the phone lines,

please press star 1. And at this time, sir, it appears we have no questions from the phone. OK. Steve, any questions on the portal? No questions on the portal, Mark. OK.

Well, with that, thank you, everyone, for joining. And I know I speak to some of you from time to time, so we will continue to do that. And everyone, please have a great day. Thank you. Thanks, Sylvia.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.