Mountain Province Diamond (TSX:MPVD) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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Summary

MPVD reported a strong operating performance in Q1 2026 with higher grades, but faced a $600,000 EBITDA loss due to a weaker diamond price environment.

Total tonnes treated decreased by 18% compared to Q1 2025, yet over 2 million carats were produced, a record high for the company.

Diamond market remains challenging with geopolitical tensions and tariff uncertainties affecting sentiment; particularly, smaller diamond categories are under pressure.

The company's working capital position is negative, though slightly improved from year-end, with significant accounts payable increases linked to winter road deliveries.

MPVD sold twice the volume of carats compared to Q1 2025, but at less than half the price, resulting in a $65.1 million net loss after tax for Q1 2026.

Management highlighted the strategic importance of navigating liquidity challenges and maintaining safety standards, working closely with stakeholders to resolve financial issues.

The company is exploring options to address liquidity challenges, including support from De Beers and working capital injections from Mr. Dermot Desmond.

Full Transcript

OPERATOR

Good morning ladies and gentlemen and welcome to the Mountain province Diamonds Inc. Q1 2026 webcast and conference call. At this time, all lines in a listen only mode. Following the presentation, we'll conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 13, 2026. I would now like to turn the conference over to Jonathan Comerford, CEO of Mountain Province Diamonds. Please go ahead.

Jonathan Comerford (President and CEO)

Good day to everyone who has dialed in to listen to our Q1 2026 results call. My name is Jonathan Comerford and I'm the President and CEO of the Company. Also present on this call is Steve Thomas, our CFO Reid Mackey, our Vice President, Diamond Sales and Marketing. At the conclusion of this presentation, the team will then be available for any questions you may have. Firstly, I would 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 standard of corporate social responsibility and that is something that we continue to be proud of. We own 49% of the Gahcho Kué mine in the Northwest Territories with De Beers Group, a division of Anglo American plc owning the remaining 51%. Today I will speak to our Q1 2026 results and provide some insight into our operational and financial performance. Following that, Steve, our CFO will discuss the Q1 financial performance of the company and Reid will comment on the overall diamond market. I will then make some closing remarks to complete the presentation and answer any questions that you may have. I will start the review of Q1 results with safety. Gahcho Kué's operations have continued to be lost time injury free and we are now approaching a full year without a lost time injury. The very challenging winter months are behind us and the operations are now focused on safely navigating the freshet period which is now upon us. Q1 results highlights I'm now going to run through some highlights from our first quarter of 2026. The story of Q1 is one of strong operating performance with higher grades offset by a weaker diamond price environment resulting in a 600,000 EBITDA loss for the quarter. Turning first to the operations, total tonnes treated in Q1 2026 were down 18% compared to the same period in 2025. Despite this, we delivered a record quarter in terms of carats recovered with over 2 million carats produced on the mining side. Total tonnes mined were also lower year on year. This reduction reflects both the challenging winter conditions and by the joint venture partners to pause mining at Tuzo with a focus on conserving cash and maintaining operational flexibility. Importantly, grade in Q1 was 2.64 carats per tonne compared to 0.82 carats per tonne in Q1 2025. We continue to outperform budget on grade. However it is worth noting that the size frequency distribution has been below expectations with a greater proportion of recovered stones in the small categories which are currently under the most pressure in the market. In summary, operation safety performance these remain strong and carat recovery is ahead of plan despite lower tonnes treated and reduced mining rates. Turning briefly to the diamond market, Reid will cover this in more detail. At a high level the market remains very challenging with ongoing uncertainty around US tariffs and geopolitical tension in the Middle east weighing on sentiment on in kind elections and stakeholder discussions. We are in the middle of a critical and sensitive process. While I appreciate the importance of this topic, I'm not in a position to provide further detail at this stage. I would however like to thank the government for its support to the diamond industry, De Beers for its patience in allowing the company time to resolve its liquidity issue, and Mr. Dermot Desmond providing working capital to the company again giving it time to explore these discussions. With that I will hand over to Steve to take you through the financials.

Steve Thomas (Chief Financial Officer)

Steve thank you Jonathan and good morning everyone. Noting all numbers discussed will be in Canadian dollars unless otherwise stated. In Q1 2026 we sold twice the volume of carats compared to Q1 2025, but at less than half the price due to continued volatility as a tariff regime for which exemption of rough diamonds has been indicated is not yet enacted. Cost of sales in Q1 2026 are higher than Q1 2025, but when normalized per carats sold were comparatively much lower.

Steve Thomas (Chief Financial Officer)

The quarter saw minimal net depletion of the ore stockpile, although 860,000 tonnes less than at the end of Q1 2025. As in that period, carats recovered were drawn heavily from the stockpile. The company's working capital position at minus $63.1 million is slightly less negative than it was at the year end with the increase in current assets of rough diamonds on hand and consumables from the winter road deliveries offsetting the marked increase in accounts payable balances which I will discuss shortly. Q1 2026 saw a slight strengthening in the US dollar resulting in an unrealized foreign exchange loss on US dollar debt conversion with $4 million less revenue in Q1 26 than Q1 25 and $10 million higher. Cost of sales operating income was $14 million lower than the comparative period in 25, but with increased finance expenses and a higher FX loss, net income was $31 million lower and cash from operations $16 million lower than Q1 2025. Turning to the balance sheet since the year end the most significant changes are inventories increased by $54 million to 206 million which is comparable to the balance at the same time last year.

Steve Thomas (Chief Financial Officer)

That increase has been driven by a $47 million increase in consumables, notably 55 million litres of fuel from the winter road deliveries. Rough diamond values increased by 6.5 million, reflecting a volume increase from 643,000 carats at the year end to 768,000 carats at the end of Q1. And lastly all stockpile value stayed relatively flat at about $53.5 million despite a slight decrease in total tonnes from 2.31 million to now 2.28 million tonnes and that comprises growth in the NEX ore related tonnes in the stockpile and the reduction in the Tuzo tonnes.

Steve Thomas (Chief Financial Officer)

As we treated some of that lower grade Tuzo material in this quarter, accounts payable increased from 126 million at the 25 year end to 169 million, reflecting a $47 million increase in commercial payables as the bulk commodities were delivered via the winter road during the quarter amongst other items. This balance is higher than the comparable Q1 25 balance as we took delivery of 55 million litres this year in line with our strategic plan compared to only 51 million litres in 2025's winter road. The accounts payable balance at the year end includes the cash calls owing to De Beers of $30 million at the year end, which by the end of Q1 2026 had increased to $81 million and by April 30 this year to closer to $123 million. Property, plant and equipment decreased to $487 million from $518 million at the year end, reflecting only 3.1 million increase in capitalized waste stripping. In line with our recent announcement to pause to zone stripping in order to preserve cash.

Steve Thomas (Chief Financial Officer)

The total capitalized value within ppe stands at $136 million. That small increase is offset by a $3.2 million reduction in decommissioning and restoration costs and a $32.9 million depreciation charge turning to the embedded derivative asset, which is the repayment feature in the senior that decreased to $106,000 from $343,000 at the year end due to the higher discount rates used in the fair value calculation. It's worth noting that there is no longer a derivative asset or liability calculated on currency hedges as none are outstanding at Q1 2026 with the last hedge having been settled in March.

Steve Thomas (Chief Financial Officer)

For long term liabilities, the slight strengthening in the closing US dollar rate from Q1 2026 has tended to increase the derived Canadian value of the US dollar denominated debt and explains the unrealized FX loss of 6.0. That balance compares to a $300,000 loss in Q1 2025 when FX did not move. Over the course of that quarter, decommissioning liabilities decreased by $5 million to 113 due largely to $2 million being paid in reclamation expenditures in the quarter and a slightly higher discount rate used in the calculation. Turning now to cash flow and earnings, in Q1 2026 858,000 carats were sold at an average price of USD $34 a carat or 47 Canadian, generating $40 million in revenue compared to only 426,000 carats. But at USD $72 a carat for 44 million of revenue in Q1 2025, market conditions have remained challenging during this quarter and the decision was taken to blend lower grade Tuzo ore from the stockpile along with the NX ore mined to improve throughput rates in the plant. Q1 2026 production costs increased to $50.5 million from 39 million in the previous quarter but when adjusted for equivalent carat sold are comparatively much lower are comparatively much lower than Q1 2025. Both quarters experienced a similar inventory write down charge of approximately $10 million given that net realizable value was lower. Cash cost per tonne in Q1 2026 at $131 are 20% above Q1 2025 as all 926,000 tonnes treated in Q1 2025 were drawn from the existing stockpile compared to only 30,000 tonnes of the 759,000 treated in this quarter. When looking at cost per carat, Q1 2026 is far lower than Q1 2025 because of the grade of the ore treated being three times higher, resulting in far higher carats. Recovered costs inclusive of waste stripping are lower per tonne in Q1 2026 as the cash cost of waste stripping was only $3 million compared to 31 million in Q1 2025. Given this and the far higher carat recovery due to grade waste, inclusive costs per carat at $53 in Q1.26 compared to $192 in Q1 2025, the company reported a mine operating loss of $36 million in Q1 26 versus a loss of 22.4 million in Q1.25. Other items include a 0.9 million loss related to the write down of assets under construction, a net derivative loss of $130,000 compared to a gain of 815,000 in Q1 2025. The Q1 26 loss comprises a realized loss of 56,000 on closing out the last US dollar hedge and a $74,000 loss on the embedded derivative we have for the early repayment option on the senior loan notes. The finance expense of $23 million compared to only $10 million in Q1. 25 reflects the continued accumulation of interest on the Senior Secured Notes and Junior Credit Facility as well as on the short term US$40million term loan and the Canadian $33million working capital facility. For those short term debts, the term date was recently extended from April 30 to June 30, 2026. The deferred tax recovery of $4.5 million reflects the operating losses compared to a recovery of $3.8 million in Q1 2025. Cash flow from operating activities was an outflow of $18 million compared to an outflow of $1 million in Q1 2025, primarily due to lower revenue and higher cash costs of production. In order to partially fund the cash calls owed to the operator. De beers drew down $33 million from the restricted cash balance as it did at the end of Q3 2025, and that balance will need to be replenished in due course. Adjusted EBITDA was negative $600,000 compared to positive 5.8 million at the end of Q1 2025 and with a resulting margin reducing to minus 2% compared to the comparative period being plus 13%. Net loss after tax was $65.1 million compared to a loss of 34.4 million million in Q1 2025, with the loss per share in Q1.26 being $0.31 compared to a loss of $0.16 in Q1.25. In conclusion, although operational performance remains strong with the mine producing a record 2 million carats, the quarter was financially challenging due to continued weak pricing and Reid will expand upon general market conditions short. The company is in ongoing discussion with our lenders and are particularly grateful to Mr. Desmond who in addition to providing a working capital injection, agreed to extend the repayment dates in respect of the working capital facility and Bridge loan to June 30. De Beers has remained supportive throughout and agreed to extend the in kind election notice due dates for those amounts that have come due and which in total as of today's date now stand at million. We are also exploring other opportunities through the LETL program program as a potential source of working capital to enable the company to meet its cash flow obligations. It's through successful negotiation with these three parties that the company hopes to come through what is a historically challenging price environment. Thank you. And with that I will turn the presentation over to Reid Mackey, our VP Diamond Sales and Marketing. Reid Thanks Steve.

Reid Mackey (Vice President, Diamond Sales and Marketing)

Going into 2026, the overall market sentiment was fairly cautious amid ongoing uncertainty over U.S. tariffs and the pending sale of De De Beers. The market picked up slightly early in the year and many in the industry were feeling more optimistic about the year to come. But the outbreak of war in the Middle east has now shifted the market back to a more of a wait and see approach. The war has caused disruptions through Dubai, giving its proximity to the conflict and its importance as a diamond trading center. We still see mainly logistical and local retail disruptions rather than larger structural market shifts. However, some customers have reported difficulty moving goods in and out of Dubai and we will continue to monitor the situation closely. Rough diamond producers continue to face a subdued market with some reducing productions to control supply and operating costs. Diavik mine ceased production in March has planned, leaving only two operating Canadian mines, Gahcho Kué and Ekati. Although Ekati's filing for CCAA recently is of concern, tightening Canadian supply has the potential to increase the strategic importance of these mines amid ongoing demand for responsibly sourced and traceable natural diamonds. Pricing pressures do continue, as Steve pointed out, and as we've seen for a while, largest goods continue to outperform smalls, with prices for stones above 2 carat stabilizing in Q1 with steady demand for large, high quality stones. At the same time, though, smaller goods have experienced further price decline. De Beers formally adjusted its price book down in April and recent tender results in Antwerp indicate Q1's price pressure is continuing into Q2. Traders and wholesalers continue to exercise caution. The midstream as a whole is still selectively purchasing to fulfill specific orders rather than to maintain or take position in broader inventories. On the retail side, China appears to be stabilizing after an adjustment period in jewelry store count and inventory levels and there is a modest recovery in consumer spending. While in India retail remains robust, supported by bridal demand and investment purchases, Indian consumers are still showing strong preference for natural diamonds over lab grown. Lab grown diamonds are still putting pressure on the naturals market in the US driven mainly by price, although more affluent customers and major luxury brands are still favoring natural diamonds, valuing the exclusivity that natural diamonds represent, US commercial retailers continue to enjoy high margins on lab grown stones, but as their wholesale costs continue to fall, that value differentiation between the two products has become more obvious. Highlighting differentiation, luxury jewelry brands continue to perform well as evidenced by Kering's recorded Q1 results which saw their jewelry sales up 14% overall over Q1 2025 as the remainder of the group's revenue flatlined. Marketing campaigns are leveraging the rarity and exclusivity of naturals to drive diamond jewelry demand and the World Federation of Diamond Horses has announced a dedicated budget for global marketing of natural diamonds. With this volatility and uncertainty continuing to buffet global economy, strategic marketing efforts for natural diamonds remain essential. To maintain relevance with increasingly cost conscious consumers, the industry will need to focus on opportunities for long term growth for natural diamonds with verifiable origin and responsible sourcing. And with that, I'll pass it back to Jonathan for closing remarks.

Jonathan Comerford (President and CEO)

Thank you Reid. So to conclude 2026, we have continued to focus on safety performance, achieving nearly a full year without a lost time injury. We have maintained strong carat recovery driven by exceptionally high grades. As we move through 2026, the priority for Mountain Province is clear. We need to navigate a very challenging diamond market caused by geopolitical and US tariffs which has resulted in diamond prices at cyclically low levels. With an aim to come up with a solution to the company's liquidity challenges. I would like to thank our stakeholders as we work collaboratively to identify solutions and establish a path towards resolving this issue and protecting the 700 jobs at Gahcho Kué that rely on us. Thank you very much for your time. My team is now available to take any questions you may have.

OPERATOR

Thank you. At this time, if you'd like to ask a question, please press Star one on your telephone keypad. If you like to withdraw a question, press Star two. One moment please for your first question. Again, if you'd like to ask a question, please press Star one. Your first question comes from Michael beach from Independent. Please go ahead.

Michael Beach

Yeah, thanks very much for your. Challenging situation and I guess I would Ask two questions initially. One is what proportion of your total production is stones with a per carat value of more than $400? I know it's a very small proportion, but can you offer a comment in that regard? And the second question is, what's your current inventory of stones? Approximately what proportion of that is small stones? Thank you for your time.

Reid Mackey (Vice President, Diamond Sales and Marketing)

Hi, Michael Reed. Do you have any thoughts on that? Yeah, I can give. It's not the information we typically give out and we'd have to hand, but. Reid, what do you think? Yeah, what I can't say at the current moment is we have, in terms of stock that we're holding, it's working capital. So we have not been stocking anything in terms of trying to. We haven't been stocking anything in terms of playing the market. So we've been selling everything, obviously with the revenue, the priority based on revenue retrieval. That's kind of where our focus lies in terms of actual production distribution. What I can say is in smalls, from a value perspective, and that's, I think, the salient point here, we're usually looking at around, from a value perspective, about 20%. I'll kind of say 20 to 30%, just to keep it vague. And so we obviously have an important exposure there in terms of volume, where it is sitting kind of more in the neighborhood of 80%. So I think I'll leave it at that because it is not something we typically put out there. But I think that answers your question. Michael, please chime in if there is anything missing there.

Steve Thomas (Chief Financial Officer)

Michael, I'd also refer you to. In our financial statements, we do have a figure for the inventory, the total value of our inventory. So that will be on the balance sheet at the end of March 31st.

Michael Beach

Yes, that's somewhat helpful. The proportion of stoness that has a significant value is very small. And so the. I see the inventories. The inventories vary considerably from one quarter to another. And that may not be. That's probably reflecting the timing of sales. And so the timing of sales is intermittent, I guess I would venture to say. And so this quarter, I think you say that you propose to have 3 or 4 sales. Is that correct?

Reid Mackey (Vice President, Diamond Sales and Marketing)

This quarter we will have 2 sales. Typically, yeah. For Q1, we have 2 sales. Yeah, yeah. For Q1, we typically have. We have 2 sales. That's correct. There has been the odd occasion where we've been able to drag a later sale into Q1, but that wasn't the case this year. So you should expect in. In Q2, three sales.

Michael Beach

Right. Fair enough. Okay, so if 80% of the stones are small stones, then we know the fact that that component of the market is under severe pressure. And do you anticipate that that will cover your variable costs? I guess is my final question.

Steve Thomas (Chief Financial Officer)

Well, sorry, when you say 80%, that would be typical. So that's 20%. 80% by number of carrots, not by value. Obviously the value is in the highest stones.

Michael Beach

Certainly, certainly. No, I understand that. But if you're using 20% as a broad category, then we really don't know what the proportion is of small, sorry, large stones, which have a significant value. So the 80% comprises all the small stones and perhaps in the order of US$35, US$33, whatever the present pricing is. Does that cover your variable costs or no?

Steve Thomas (Chief Financial Officer)

Yep, Michael, it's Steve here. I would say, obviously, as we've outlined, the big challenge for the company is cash management, working capital management. And what we see for this mine, because it's a fly in, fly out mine, about 75% of the cash calls for the entire year go out in the first half of the year. So there's a significant outpouring of cash. And as Jonathan and Reid have indicated, you might only have two sales in the first quarter. So there's certainly a, a cash challenge in H1 that is lessened in H2 because you don't have as much cash spend. So on a cash front, things become easier in the second half of the year. From the point of view of variable cost, obviously at $33 a carat, you know, that's challenging to say the least, and I'll say no more than that. But I just want you to understand the dynamic of why you're seeing such a cash challenge in H1, which will be different to the one we face in H2.

Michael Beach

Great. Yes, I understand that. And so sales are lumpy and the expenditures are leaning towards the first half of the year. And if you can make it till June 30, then we'll hope for the best after that. And good, good work on everybody's part. Good work on everybody's part to keep things afloat thus far.

OPERATOR

Thank you. Thank you. Thanks. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press Star one. And there are no further questions at this time. I will turn the call back over to Jonathan for closing remarks.

Jonathan Comerford (President and CEO)

Thank you very much for that. As long as there are no further questions, I'd like to thank everyone for listening. So I'd like to conclude the conference and thank everyone for participating.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.