Rough diamond: Dermot Desmond may have to bail out his Canadian mining investment yet again

The massive Gahcho Kue, in the Canadian tundra, is 49 per cent owned by Mountain Province Diamonds, whose main shareholder is Dermot Desmond. South African industry giant De Beers owns the rest.

“The company may need to pursue a distressed debt exchange... to avoid bankruptcy,” warned Fitch. Mark Wall, Mountain Province Diamonds’ chief executive, told The Irish Times this week that he “strongly disagrees” with Fitch’s assessment. In March of this year, Desmond stumped up once again with another $50 million loan, which pays him an 8 per cent coupon out to 2027. In addition, he received warrants giving him the option to bring his stake in the business up to about 46 per cent for a further $25 million.Small retail investors are congregating online to wonder how much more of Mountain Province the Irish businessman might accumulate in return for funding the December restructuring that Fitch has predicted.

Dobson was involved throughout the 1990s in Canadian company Glenmore Highlands. In 1998, Desmond bought one-third of the business from Lytton Minerals. Two years later, Glenmore merged with Mountain Province, which was already in partnership with De Beers on Gahcho Kue. Ratings agency Fitch says Mountain Province Diamonds’ ability to repay its debts is “highly uncertain” and it may need to do a deal with its creditors to avoid a default.

The company’s revenues and income have recovered strongly since the pandemic, while it is also generating strong cashflow. Rough-diamond prices have recovered well from a slump that occurred in the years immediately after Gahcho Kue opened. Yet the $300 million cliff edge bond deadline of December 15th still looms over the company, as outlined by Fitch.

“Desmond has been supportive of the business throughout this whole period. He gave it loans. He stepped in to buy its diamonds when the company couldn’t sell them, although he sold them on for a profit down the line. But then he shared that return with Mountain Province. Those sort of actions, as we like to say in Canada, kept the wolf from the door.”

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