VANCOUVER (miningweekly.com) – TSX- and Nasdaq-listed diamond producer Mountain Province Diamonds has signed a definitive arrangement agreement whereby it will buy its exploration spinout Kennady Diamonds in an all-scrip deal worth about C$176-million, the companies announced on Monday.
News of the transaction buoyed Kennady's TSX-V-listed stock, lifting shares more than 20% to C$3.31 apiece on Monday.
Mountain Province first announced spinning out its Kennady North project into a newly listed public company late in 2011. Since Kennady Diamonds was incorporated in February 2012, Kennady has outlined diamondiferous bodies that contain indicated resources of 13.62-million carats and inferred resources of 5.02-million carats.
These are spread over the Kelvin kimberlite, which hosts indicated resources of 13.62-million carats – at an average grade of 1.60 ct/t and an average value of $63/ct, as estimated by a 2016 bulk sample – and the Faraday kimberlite cluster, which hosts inferred resources of 5.02-million carats at an average grade of 1.54 ct/t and average value of $98/ct, as estimated by a 2017 bulk sample.
Mountain Province believes that there exists significant upside to further grow resources at both Kelvin and Faraday and to develop potential resources at the Doyle and MZ kimberlites. The deal will add about 67 164 ha of highly prospective and 100%-owned exploration ground strategically surrounding Mountain Province's flagship 49%-owned Gahcho Kué mine, which is operated by De Beers Canada, which also owns the balance.
Mountain Province also announced that it would provide financing to Kennady of up to C$10-million through an equity private placement at C$2.50 a share, in multiple tranches, designed to coincide with Kennady's budget for the current work programme.
The boards of both companies have approved the transaction, which is now subject to a shareholder vote of both companies. The transaction is also subject to court approval as well as the acceptance of the applicable stock exchanges.
The transaction is expected to close in April.
Meanwhile, Gahcho Kué has beaten its upwardly revised full-year production guidance by 8% at 5.93-million carats of diamonds. This was driven by overperformances in both ore tonnes processed (actual is 3% greater than guidance) and grade recovered. With an open-pittable reserve of 55.5-million carats, the phase-one mine is projected to produce an average of 4.5-million carats a year over an initial life of 12 years. A further resource of 20-million carats is expected to extend the mine life to beyond 17 years.