Mountain Province Diamonds Inc. (MPV), a partner with De Beers in the Gahcho Kue project in northern Canada, plans to raise C$125 million ($119 million) in a rights offering backed by Irish billionaire Dermot Desmond.
The Toronto-based company’s biggest shareholder will ensure the offering in the first quarter is fully subscribed by buying rights not taken up by other investors, Chief Executive Officer Patrick Evans said in a telephone interview. Mountain Province, which needs the money for its 49 percent share of the cost of building the proposed diamond mine, raised C$47 million in an offering a year ago.
“He backstopped that one and will backstop the next one as well,” the 58-year-old Evans said, adding that Desmond has owned Mountain Province shares for 17 years. “I don’t know that he is as forthcoming and generous with all his businesses, but he certainly is with ours.”
Mountain Province’s financing and plans for mine construction at Gahcho Kue, 400 kilometers (250 miles) south of the Arctic Circle, come amid renewed investor interest in diamond projects as a recovering global economy boosts demand for engagement rings and other jewelry in the U.S. and emerging-market countries such as China and India.
Mountain Province has “a pretty strong core group of shareholders, and that’s put the company on a good footing when it comes to fund-raisings,” Edward Sterck, a London-based analyst at Bank of Montreal who rates the company the equivalent of a buy with a 12-month price target of C$6, said by phone on Nov. 19. “Those core shareholders have stood by the company.”
Jonathan Comerford, a senior executive of Desmond’s closely held International Investment & Underwriting and the non-executive chairman of Mountain Province, declined to comment on whether Desmond plans to backstop the planned rights offering.
“We have a policy about not commenting to the media about our investments,” Comerford said Nov. 20 in an e-mail response to questions.
Mountain Province rose 3 percent to C$5.14 on Nov. 22 in Toronto, giving the company a market value of C$485.8 million. The shares have increased 32 percent this year, while the Standard & Poor’s/TSX Materials Index declined 32 percent. Mountain Province has four buy, no hold and no sell ratings from analysts, with an average price target of C$6.62, according to data compiled by Bloomberg.
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