Mountain Province Diamonds' Existential Vote: Shareholders Decide the Company’s Financial Survival

Mountain Province Diamonds (TSX: MPVD) stands at a crossroads. On May 16, 2025, shareholders will vote on a CAD33 million working capital facility (WCF) proposed by Dunebridge Worldwide Ltd., a related party. The outcome could determine whether the company survives the year or faces collapse. This article dissects the stakes, risks, and implications of one of the most critical votes in the company’s history.

The Proposed WCF: A Lifeline or a Costly Gamble?

The WCF is structured as a short-term loan to fund Mountain Province’s share of operating expenses at its 49%-owned Gahcho Kué mine through 2025. Key terms include:
- Interest Rates: 10.5% on drawn funds and 7% on undrawn balances.
- Penalties: 2.5% over the base rate if the principal isn’t repaid by December 31, 2025.
- Total Cost: Up to CAD3.6 million in fees and interest, equivalent to 31% of the company’s April 16, 2025, market capitalization (CAD11.7 million).

When combined with prior refinancing deals, the total consideration paid to insiders (including Dunebridge) now exceeds 260% of Mountain Province’s market cap. This raises eyebrows: why is a related party being paid so handsomely for a loan that’s critical to the company’s survival?

The Related Party Conundrum

Dunebridge is controlled by Mr. Dermot Desmond, who holds 35% of MPVD shares via Vertigol Unlimited. Under TSX rules, Vertigol and other Desmond-affiliated entities must abstain from voting, leaving minority shareholders to decide the WCF’s fate.

The transaction’s cost relative to the company’s value is alarming. For context, if Mountain Province’s market cap were CAD100 million, the total consideration would equate to a staggering CAD260 million—a figure that far exceeds the company’s valuation. This imbalance has fueled speculation about whether minority shareholders will view the terms as fair or exploitative.

Risks of Rejection: A "Going Concern" Crisis

Mountain Province bluntly states that rejecting the WCF would cast “serious doubt” on its ability to continue operations. The company’s liquidity is already stretched: in Q1 2025, it reported a net loss of CAD5.4 million, with cash reserves dwindling. Without the WCF, it would likely default on obligations, including its 49% stake in Gahcho Kué—a mine that accounts for nearly all its revenue.

Voting Dynamics: The Minority’s Moment

Only 64.5% of shares (excluding Desmond’s bloc) are eligible to vote. The Noteholders under the Second Lien Notes have waived their right of first refusal, removing one procedural hurdle. However, minority shareholders may demand answers:
- Why is Dunebridge, an insider, providing this loan at such high rates?
- What safeguards ensure proceeds are used solely for operational needs?
- How does the penalty structure incentivize timely repayment?

The independent committee’s endorsement, backed by Ernst & Young’s due diligence, suggests the WCF is the only viable option. Yet the financial terms—particularly the 31% of market cap in fees—will test shareholder trust.

Conclusion: A High-Stakes Roll of the Dice

The May 16 vote is a do-or-die moment for Mountain Province. Approval secures liquidity for 2025 but leaves the company burdened with debt and costly obligations. Rejection risks immediate insolvency.

Investors should weigh two realities:
1. Market Capitalization vs. Costs: The CAD3.6 million fee alone represents over 30% of MPVD’s market cap—a red flag for value erosion.
2. Operational Necessity: Without the WCF, the company cannot fund its share of Gahcho Kué’s expenses, risking its stake in the mine and its sole revenue stream.

Historical data underscores urgency. Over the past year, MPVD’s stock has fluctuated between CAD0.10 and CAD0.25, reflecting investor anxiety. A rejection could send shares plummeting, while approval might stabilize the stock—but only if the company can manage its debt burden.

In short, this vote isn’t just about a loan—it’s about whether Mountain Province can survive long enough to capitalize on diamond market rebounds or secure better financing terms. Shareholders, armed with the facts, must choose between a costly lifeline and the abyss.