Mountain Province Diamonds Secures Lifeline in Deepening Financial Crisis

TORONTO, ON – May 01, 2026

In a series of emergency maneuvers highlighting severe financial distress, Mountain Province Diamonds Inc. has secured a short-term lifeline by extending the maturity on its credit facilities and selling future diamond revenues to a related party. The deals provide a desperately needed, albeit temporary, cash injection to keep operations running at its Gahcho Kué diamond mine amid a punishing market.

The company announced it has pushed the maturity date for its US$40 million term loan and a US$33 million working capital facility from April 30 to June 30, 2026. Simultaneously, it sold nearly US$1 million of its diamond sale receivables for an immediate cash payment of US$833,000. Both transactions were conducted with entities controlled by Mr. Dermot Desmond, the company's largest shareholder, underscoring a critical dependence on its primary backer to stave off a deeper crisis.

These actions paint a stark picture of a company on the brink, forced to make difficult choices as it navigates a confluence of crushing debt, plummeting diamond prices, and unresolved pressures from its joint venture partner, global diamond giant De Beers.

The Financial Tightrope

The two-month extension on US$73 million in debt, granted by Dunebridge Worldwide Ltd., an entity also ultimately owned by Mr. Desmond, provides only a brief respite. This marks the fourth such amendment to the credit agreement, signaling a recurring and deepening liquidity problem rather than a one-time issue. The company is effectively kicking the can down a very short road, buying just weeks to find a more permanent solution.

The need for such drastic measures is rooted in a catastrophic financial performance. The company's 2025 fiscal year was brutal, with revenues collapsing to US$111.5 million from US$195.2 million the year prior. This was driven by a collapse in the average price received for its diamonds, which fell to just US$59 per carat, the lowest since the mine began operations. The financial strain translated into a staggering net loss of $279.5 million for the year, including a major $103 million impairment charge on the mine itself.

The situation has not improved in 2026. While Q1 production saw a record volume of carats recovered, the market for smaller, lower-quality stones—which made up a significant portion of the haul—remains exceptionally weak. The company's average selling price in the first quarter cratered to just US$34 per carat, a precipitous 67% drop from the US$72 per carat it fetched in the same period last year. This has left Mountain Province with a severe cash flow deficit, a situation confirmed by an S&P Global Ratings report that warned of nearly C$100 million in payments due to De Beers starting in mid-May, alongside other significant debt and interest obligations.

Governance Under Duress

The nature of the rescue package raises significant corporate governance questions. Both the loan extension and the receivables sale are considered "related-party transactions" because they involve Mr. Desmond, who controls over 35% of the company's shares. Typically, such deals would require a formal valuation and minority shareholder approval to protect against potential conflicts of interest.

However, Mountain Province is bypassing these requirements by invoking the "financial difficulty" exemption under Canadian securities law (Multilateral Instrument 61-101). This clause is reserved for companies in such dire straits that the immediate need to improve their financial position outweighs standard procedural protections. The company stated that its board of independent directors, acting as a Special Committee, reviewed and approved the deals, determining them to be "reasonable given the difficulties that the Company is facing."

To maintain procedural integrity, two board members with declared conflicts of interest, Jonathan Comerford and Brett Desmond, abstained from the vote. While the company is following the letter of the law for distressed entities, the reliance on this exemption underscores the gravity of the situation and centralizes power with its largest creditor and shareholder, potentially at the expense of minority investors.

A Diamond Market in Turmoil

Mountain Province's struggles are a microcosm of the immense pressures facing the entire natural diamond industry. A perfect storm of economic headwinds has battered producers. The rise of more affordable lab-grown diamonds has captured significant market share, particularly in the engagement ring segment, putting relentless downward pressure on prices for smaller natural stones.

Demand in the key Chinese market remains sluggish, while a moratorium on rough diamond imports by Indian manufacturers in late 2025 created a supply glut that is still being digested. Consequently, the RapNet Diamond Index for 1-carat diamonds fell nearly 10% in 2025, with smaller categories seeing even steeper declines. This industry-wide downturn has been particularly painful for Mountain Province, whose production mix in recent quarters has skewed towards the very smaller-sized diamonds that are most out of favor with the market.

The De Beers Dilemma

Compounding the company's market woes is a complex and strained relationship with its senior partner at the Gahcho Kué mine, De Beers. Under the terms of their joint venture agreement, De Beers has been issuing "in-kind election notices" (IKE Notices), which effectively allow it to garnish Mountain Province's share of diamonds from the mine's output to settle outstanding debts.

To date, these notices total over CAD $49 million, diverting crucial revenue away from Mountain Province at the worst possible time. The continuous issuance of new IKE notices as old ones come due creates a cycle of cash-flow deprivation. In response to the liquidity crunch, the joint venture partners have already been forced to pause the Tuzo Phase 3 expansion project at the mine, sacrificing future growth to conserve cash today.

While the company states that it "and De Beers continue to discuss how best to address the cash flow matters," the ongoing garnishment by its own partner adds another layer of acute pressure. The sale of receivables to Mr. Desmond is further complicated by these notices, as his right to collect is subordinate to De Beers' claims on the diamond proceeds. With the clock ticking towards a new June 30th deadline, the future of the Gahcho Kué mine's junior partner hangs precariously in the balance.