Mountain Province Diamonds Inc. said recently that it plans to enter into an agreement to sell (the Sale) diamonds worth US$50 million to Dunebridge Worldwide Ltd.

The first sale of diamonds valued at approximately US$ 22 million is expected to take place on June 11, 2020, after the signing of a binding agreement.

“The transaction with Dunebridge will permit the Company to sell its run of mine diamonds (below 10.8 carats) at the prevailing market price at the time of each sale,” Mountain Province explained. “The transaction will also allow the Company to participate, after fees and expenses in a portion of any increase in the value of the diamonds realised by Dunebridge upon its future sale of the diamonds to a third party.”

The fees, calculated for each sale, are fixed at 10% of the value of each sale for the first year; and 10% per year pro-rated for years two and three. “The expenses relate to any future sale costs. Once all fees and expenses have been deducted any surplus will be shared equally between Dunebridge and the Company,” Mountain Province stated.

As traditional markets for rough diamonds have been closed since mid March 2020 due to the impact of the coronavirus, the Company had been exploring alternative sales channels and sources of financing in order to ensure sufficient funding for operational and corporate expenses as the mine continues to be operational. 

“This transaction is expected to provide the liquidity required in the short term whilst the Company awaits the gradual re-opening of the global economy and traditional selling methods,” Mountain Province noted.

A committee of directors of Mountain Province, which includes Tom Peregoodoff, Karen Goracke, Dean Chambers, and William Lamb, undertook “a deliberate and full consideration” of the Sale and various alternatives and financing options available. They concluded that the Sale is “reasonable and represents the best alternative for Mountain Province in the circumstances”; and is in the best interests of the Company and its stakeholders.

“The Independent Committee has unanimously recommended the Sale to the board of directors of the Company (the Board),” Mountain Province said. “The Board has received the recommendations and findings of the Independent Committee, and Mr. Jonathan Comerford and Mr. Brett Desmond having declared conflicts of interest and not attending any part of any meeting where the Sale was discussed and not voting on the Sale, has unanimously found that that the Company is in serious financial difficulty, that the Sale is designed to improve the financial position of the issuer, that Section 5.5(f) of National Instrument 61-101 is not applicable, and approved the Sale.”

Dunebridge is controlled by Dermot Desmond, an insider and related party of Mountain Province; with Desmond owning just above 32% of the Company's stock. The transaction therefore constitutes a "related party transaction".

The terms of the Sale were unanimously approved by the Independent members of Mountain Province's Board of Directors.  

The completion of the Sale is subject to approval of the TSX, the Company's lenders, and all other necessary regulatory approvals.  The Company stated that the proceeds of the Sale will be used for operations and corporate expenses, including the funding of bond interest, all in the ordinary course as having been budgeted by the Company prior to COVID-19.