Mountain Province Diamonds: A Diamond in the Rough, Ready for Its Turnaround

The diamond sector is in a cyclical trough, but for investors with a long-term view, Mountain Province Diamonds (MPVD.TO) presents a compelling opportunity. Despite reporting a GAAP net loss of C$80.8 million for fiscal 2024, the company’s underlying operational resilience and strategic initiatives position it to capitalize on an industry upswing. This analysis argues that Mountain Province’s undervalued asset base—bolstered by a cost-disciplined approach and access to high-grade reserves—could flip earnings positive by 2026, mirroring the post-crisis turnarounds seen in Canadian resource firms like those of the 1990s.

The Current Downturn and Resilience

Mountain Province’s FY2024 results reflect the diamond industry’s challenges: a 27% drop in average realized prices to C$98 per carat, driven by weak Chinese demand and lab-grown diamond competition. Total sales revenue fell to C$267.7 million (US$195.2 million), while the net loss widened to C$0.38 per share—up from C$0.21 per share in 2023. Yet beneath the headline losses lies a company executing on operational excellence.

Key operational strengths include:
1. Cost Discipline: Despite inflation, cash costs per carat rose only modestly to C$91, while safety metrics improved by 60% (Total Recordable Injury Frequency Rate).
2. Record Processing Capacity: Ore tonnes treated hit a record 3.63 million in 2024, up 12% year-on-year, enabling higher throughput despite lower grades.
3. Debt Restructuring: A recent refinancing deal reduced near-term liabilities, bolstering liquidity ahead of a production rebound.

The Strategic Play: NEX Orebody and 2026’s Production Surge

Mountain Province’s path to profitability hinges on its plan to access the high-grade NEX orebody by late Q2 2025. This deposit, which contains diamonds of superior quality and concentration, will significantly boost recovery grades. By 2026, production is expected to shift from processing low-grade stockpiles to the NEX’s richer ore, potentially doubling carat output and lifting average prices.

Financial Impact:
- 2025: H1 will see lower-grade stockpile processing, but H2 production from NEX could drive a revenue jump.
- 2026: Full utilization of NEX is projected to push sales revenue to pre-2020 levels, with Adjusted EBITDA potentially surpassing C$150 million (pre-2023 levels).

Historical Precedent: Turnarounds in Cyclicals

Mountain Province’s situation mirrors the 1998-era Canadian resource firms that navigated macroeconomic headwinds. Take, for instance, how Canadian banks like Royal Bank of Canada (RY.TO) emerged stronger post-crisis by deleveraging and investing in core strengths. Similarly, Mountain Province has:
- Reduced Exposure to Volatility: Hedged foreign exchange risks and minimized derivative losses.
- Focused on High-Margin Assets: The NEX orebody’s premium-quality diamonds will command higher prices, stabilizing margins.
- Liquidity Management: Debt restructuring has insulated the balance sheet from near-term pressures.

Valuation: Undervalued, But Poised for Upside

At current valuations, Mountain Province trades at a fraction of its asset value. With a market cap of roughly C$250 million (as of May 2025), the stock does not yet reflect the mine’s remaining proven reserves or the NEX’s potential. Even at 2026’s projected EBITDA of C$150 million, the EV/EBITDA multiple would drop sharply, signaling undervaluation.

Investment Case:
- Catalysts: NEX’s ramp-up, stabilization of Chinese demand, and lab-grown diamond pricing pressure easing.
- Risk-Return: A 2026 EPS turnaround could revalue the stock to C$2.50–C$3.00 per share, up from its current C$0.60.

Risks and Conclusion

Risks remain: foreign exchange volatility, delays in NEX access, and lab-grown competition. However, the company’s operational track record—evidenced by cost control and record processing volumes—suggests it can navigate these challenges.

Investors should view Mountain Province as a diamond in the rough. Its disciplined execution and high-grade assets position it to thrive as the diamond cycle turns. The stock’s current discount offers a rare entry point to capitalize on an industry rebound—act now before the upswing.