Mountain Province Diamonds Inc

TSX:MPVD

Earnings Call Transcript 2018-Q3

[Operator]

Good day, ladies and gentlemen, and welcome to the Mountain Province Third Quarter Result Conference Call. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, President and CEO, Stuart Brown. Please go ahead, sir.

[Stuart Michael Brown, President, CEO & Director]

All right, thanks very much, Chris, and good day to everyone on the call. Just a brief word of introduction. On the call today with me, I have Perry Ing, Keyvan Salehi and we got Reid Mackie on the line, also on the call from Antwerp, where we believe he's closing our ninth sale of the year. The format for today, just a general introduction for my thoughts. And then I'll hand over immediately to Perry, who will take us through the financials and ore production, and then I'll give some commentary on the market, what we're doing on the mine and the future of the company, and then we'll be happy to take your questions. So without further ado, if I could hand over to Perry to take us through the numbers. Thanks very much.

[Perry Y. Ing, VP of Finance, CFO & Corporate Secretary]

Thanks, Stuart. Good morning, everyone. I'll take you through the financial and production results. All figures stated will be in Canadian dollars unless otherwise noted. The third quarter results reflect a continuation of the strong operational performance seen in the first half of the year as the GK mine continues to run at a healthy steady state. Starting first with our income statement, our headline earnings number. We reported net income of $17.5 million for the year -- or for the quarter or $0.08 a share, which compared to $27.7 million or $0.17 a share in the same period in 2017. On an adjusted EBITDA basis, stripping out the effects of unrealized foreign exchange movement, we reported adjusted EBITDA of $38 million for the third quarter, which was approximately the same as the adjusted EBITDA in the same quarter in 2017. Adjusted EBITDA for the year-to-date stands at an impressive $113 million. We believe that this demonstrates a strong cash margin for the GK mine can provide as a high-volume, low-cost per carat producer despite some challenges with top line revenue in recent sales. These margins allow us to comfortably service our debt and provide a cushion against any further weakening in diamond prices. Reported revenue for the quarter was $75 million from the sale of 789,000 carats at an average price of USD 73 per carat. The company conducted 2 tender sales, which took place within the quarter, sales 6 and 7, at an average price of USD 66 a carat. However, I should note from a revenue recognition standpoint, we also recorded roughly 1/3 of sale 5, which started in June in the third quarter as some of the revenues slipped into the third quarter due to the timing of cash received. This included the sale of 43,000 carats at an average price of USD 188 a carat for total proceeds of USD 8.1 million. Overall, the sales of $75 million on 789,000 carats compares to the sale of 757,000 carats at an average price of $69 in the same period in 2017, where we recorded total revenue of $65 million. Earnings from mine operations was $25 million for the quarter, an increase of $2 million and compared to the comparable period in 2017 and also a notable increase from the second quarter of the year, which came in at $19 million. During the quarter, we also spent $2.1 million on exploration spending, which was approximately evenly split between mine exploration at Gahcho Kué as well as exploration on our 100%-owned Kennady North Project. Turning now to the statement of cash flows. Well, just from a big picture cash flow standpoint, we started the third quarter with $33.5 million in cash and ended the quarter with $28 million in cash, so we had a net drawdown of $5.5 million. However, during the quarter, we repurchased nearly $20 million on our outstanding bonds as well as paying a $0.04 per share dividend for a total dividend payment of $8.4 million. This totaled $29 million in total financing activities along with $10 million spent on investing activities primarily related to the purchased -- remaining PP&E at the GK mine. This was all financed by the positive $33 million in cash flows from operating activities you see on the statement of cash flows. We're continuing to focus on cash flow liquidity. As noted, we ended the quarter with a healthy $28 million in cash and a networking capital of -- a balance of approximately $92 million, which is relatively unchanged from the beginning of the year and slightly decreased from $100 million at the end of the second quarter. Moving forward, we will continue to focus on cash management in the fourth quarter. The fourth quarter will be a 3-sale quarter, which should allow us to further build our cash balance to the extent possible in anticipation of winter road purchase commitments, which will start quickly in the new year. We also note that our net interest payment is approximately USD 12.5 million is due in mid-December. To date, our revolving credit facility has remained undrawn at all times, and as a result, we will minimize the use of debt to the extent possible. Besides cash and working capital, the only other item on our balance sheet that I'd like to highlight is with respect to our outstanding bonds, which are showing on the line noted as Secured Notes Payable. We repurchased USD 15 million or approximately $20 million equivalent of principal and bonds during the quarter. However, if you just look at the balance sheet, you won't see the full reduction on the balance sheet due to the foreign exchange movement during the year given the net depreciation of the Canadian dollar. So if you want to look at the true balances, please refer to Note 9 of our financial statements, which contains details. Now turning over to operations at the GK mine. Overall tonnes mined during the quarter surpassed the prior record level from the second quarter as increased machine availability, especially with full availability of the acquired trucks and travels commission last quarter has helped to increase mining rates to well over 125,000 tonnes per day. Total tonnes mined was 11.6 million tonnes, which is 40% higher than the 8.3 million tonnes in the same period in 2017 and 13% higher than the second quarter of the current year. Overall, this has closed the gap between the original budget for the year to about a 10% differential between budget and the actual for total tonnage. Ore mined at 1.16 million tonnes was similar to the third quarter of 2017 and nearly 3x the amount mined during the second quarter. The ore in stockpile at the end of the period stood at 634,000 tonnes, which represents a normal healthy operating level of about 2 months of plant feed.Production through the process plant was 759,000 tonnes accretive or approximately 8,250 tonnes per day for the quarter with 1.82 million carats that's recovered on a 100% basis at a grade of 2.4 carats per tonne. This was nearly 10% higher than the 2.22 carats per tonne recovered in the comparable period. Total tonnes processed through the plant were down compared to 823,000 tonnes processed in the same period in 2017 as annual plant maintenance shutdown occurred in September this year versus December in the prior year. In addition, we encountered several restart issues during the first week of processing, following the shutdown, which ultimately resulted in additional unbudgeted downtime of the process plant. Despite of these challenges, we have now recovered 5.4 million carats year-to-date. And with a solid month of October behind us, we now do expect to come in above the top end of our guidance range of 6.6 million carats for the year, given the strong performance so far. From a cost standpoint, cash costs per tonne, including deferred stripping, were $88 per tonne compared to $73 in the same period in 2017. And on a per carat basis, it's $37 per carat, including deferred strip, converted to $33. These numbers are broadly in line with our expectations, and we expect to come in roughly in line with our $96 per carat figure on a full year basis. With that, I'll turn it back to Stuart.

[Stuart Michael Brown, President, CEO & Director]

Thanks very much, Perry. I think the message that Perry is giving us is that we've got consistent production, consistent cost base, we're very focused on cash management and we expect to end the year on a strong basis for both of those issues. If I could turn to the market, where we've obviously seen a lot of news over the last quarter, and most of it negative on pricing. I'd like to touch on this as a subject in general for a while. The market for diamonds, especially small lower quality and brand have definitely been under pressure as we've reported in our last 2 sales where we've seen price reduction. I'd like to remind everyone Mountain Province sells all its goods on open tender, where we had a "willing buyer, willing seller" relationship. We have a very established customer base that now understands our products, and we believe we obviously sell at the best possible market price. We don't sell the premiums to markets. We can sell at the price that we have to take. We're currently busy with [ selling ] mine. We're seeing very good evidence of same people and new people viewing our goods, and interest in our fancy and specials remains very strong. So it's only in the lower qualities where we've seen this price pressure. The announcement yesterday widely reported, but not yet confirmed by De Beers, of a reduction of some 10% in the lower end goods is what we believe De Beers potentially moving their prices to where the market actually is as they've not been selling, holding back and had some refusals or is anecdotal in the market to reflect the market we are in. So we believe we're confident that we sell all the goods that we had produced, and our final distribution of diamond still has a market for it and people have got used to our product offering. We've seen some very strong news in the marketing side of the business in terms of the retail sector where some retailers are improving -- are providing us with confidence that we should have, as we go into this retail season, a potential to have a good retail season across the U.S. and the Far East, which should lead us into 2019, with a bit more of a balance between the profit made in the rough sector, as well as the polished sector and the retail jewelry sector, which hopefully would confirm reduction in price will give the diamond people that buy our goods, confidence that the market is still robust and profitable in 2019. If I could turn to the mine itself, where Perry has touched on how well we've been doing and De Beers running operations on our behalf. We have detailed interaction with De Beers, and I'd like to touch on the progress we've been making. We've been working together with De Beers and we we've planned for the new reality, as we obviously have to look at our current environment and plan according to it, and especially as we know that we're entering into a period now over the next 12 to 18 months where the Hearne Pipe, which we've recently brought into production, forms a dominant part of our production in 2019. And certainly, our initial indications there is a bit of a final product and a color distribution variance is what we're used to know. As we start to see that come through, we need to be able to ensure that we can react to this. The work streams we are working on is to improve the current operation, but to ensure our future beyond our current 2020 mine time lines, so we're working very hard to get to well into the 2030s. Issues that we're working on, these are not excessive, but looking at the resource expansion. We've already announced the Southwest Corridor, where we've added 2.2 million carats to the current mine plan. We're about to, we think, add another small amount of carat in the Hearne, where we have additional kimberlite identified between the 2 small bits of the pipe of about 300,000 carats. And we recently announced to the market that we have a potential of up to -- an additional 4.8 million tonnes and around -- and a maximum of 8 million carats contained therein in the northeast extension between 5034 and Tuzo. There's a lot more work that needs to happen to ensure a lot more of that resource can be reported into the mine plan. We're doing that work over the next 8 months. We've done a little bit more drilling, and we're in the process now of interpreting those results. And we'll defer the delineation drilling and valuation work as we get into the early parts of 2019. This should give us the ability to generate an alternative mine plan, which in itself will give us more ore going through the plants instead of the waste being stripped and discarded, they're all going through the plant. In addition to this, we have our own exploration where we -- Perry mentioned we spent some money on the Kelvin-Faraday pipes, largely to do this in geotechnical drilling. We're now doing some resource strip on the micro diamond work on Faraday to get a better understanding of grade. We have allocated a small amount of money next year into doing some targeting in the southwest portion of our Kennady property to the southwest where the mine is currently situated as we've got some higher interest targets there. More importantly, what we've looked at with the plant is what potential do we have in the plant in the near and the medium term to look at ways of increasing throughputs or improving the quality of the ore that we put through the plant. And we've been working on a number of issues that we hope to see the results thereof throughout 2019. All of this is done in to improve the margin so that we can create a better mine design that we will improve our cash flow and we can absorb any shocks that the market sends our way. So in summary, I think we're doing a lot of work, including cost control work on the mine, and we're right on top of that with our partners. So finally, I'd like to touch on the issue of liquidity and the commentary on the markets and how the world sees the diamond industry, but more specifically, how Mountain Province is placed against that compared to its peers and other players in the industry. We believe that our current margins have demonstrated with our results that the 9 months show that we are strong cash generators. We have sufficient liquidity. We're not near to drawing down on our revolver. That's a safety net which we've had in place to ensure that if anything does go wrong, we could draw on that, but we see no need to do that. We have sufficient margin and our expenses on our cash and capital is very well controlled. Our finance team and even our partners, we have regular interaction with De Beers on this. We believe the future for Mountain Province is good. We've identified significant additional ore and have the potential to identify even more ore. We're doing 3 holes now at the moment in the northeast extension and we believe those ores are intersecting kimberlites in various parts of that. We know that we have the margin. We've demonstrated that over the last quarter. We've shown we paid our initial dividend. We've also reduced our debt by CAD 20 million, which we think is very prudent. However, looking at the early part of the new year, where we managed a significant cash outflow and taking into account the market as confirmed by the speculation of De Beers, reduction in price, we believe it's prudent to not pay a further dividend in this quarter and hold our cash and see how we go through 2019 and how we complete our sale and stock for sale in 2019. We will continue to make the margins we make. And as we see it matters every quarter, we'll review our ability to pay further debt down or pay the dividends. We would like to continue strengthening our balance sheet and I'm sure we'll be prudent with our capital allocation. So in summary, the market is certainly difficult, but we're selling our products. We have an established customer base. We have over 100 businesses viewing our goods every so often. Our margins are good despite current pressure on pricing. We do generate cash. We're servicing our debt. We're servicing our capital. We're investing in the future. We're growing our resource base. And in the near term, we're looking to try to increase production through the plants. And in the medium term, we've definitely got some exciting ideas as we're working on to do that, and we have exploration potential. I think that for a diamond company that's operating in the exploration world and the mining world and the evaluation and indeed selling its diamond products is definitely one of the company you'd want to be invested in. Thanks very much, and we'll be happy to take questions now.

[Operator]

[Operator Instructions] And our first question comes from Sam McGovern with Crédit Suisse.

[Samuel Thomas McGovern, Research Analyst]

I was hoping you guys could provide some more color around the low-end diamond market and how and why you guys think it will stabilize.

[Stuart Michael Brown, President, CEO & Director]

Okay. I think I was going to hand this straight to Reid, first of all, he's sitting in Antwerp right now. And then I will add anything if I can, afterwards.

[Reid Mackie, Vice President of Diamond Marketing]

Sure. Thanks, Stuart. Yes, and thanks, Sam. Yes, well, we've seen -- as Stuart alluded to, we've seen the reductions and we've actually absorbed the reductions seen in the lower end since August. And the much-publicized third-party news that came out from the De Beers' side yesterday. The numbers we're seeing there is consistent with that. So I think from a confidence standpoint for this sector of the product, you could say that what's accrued in the past few days and what we see with our customer base is that there's been a bit more oxygen provided to that sector, and we're now seeing movement. And as Stuart also alluded to, within the context of what's anticipated to be a strong retail season in the U.S., potential for the polish stocks of those goods to move through, and therefore, draw on the rough stock that's sitting there. We've noticed in our tenders, the detail of our tenders that, most recently the last one in October, we actually saw an increase in the amounts of interest in terms of bidders and viewing than we did in August. So there's a few things you can look to details that show some glimmers of promise for stabilization in those sub-$100 for carat goods, browns and smalls.

[Stuart Michael Brown, President, CEO & Director]

Thanks, Reid. I'll just add to that, I mean, what's caused this? We should mention that in our announcement that it's definitely the Indian rupee weakening, lack of liquidity. I'm less convinced that it's an oversupply issue but has turned into one as fewer buyers have been able to buy goods, but we are selling so our liquidity is there, but at a certain price. So I do believe this will come out in the wash and hopefully come through in 2019.

[Samuel Thomas McGovern, Research Analyst]

Got it. That's helpful. And can you remind us of your mix and how much is -- of your business is in the low end market versus higher end?

[Stuart Michael Brown, President, CEO & Director]

Reid, if you want to comment on that before I...

[Reid Mackie, Vice President of Diamond Marketing]

I would say this and value turns out, we shouldn't get into the details of distribution, but it's less than 15%. So the majority of our product by value is in the higher value articles.

[Samuel Thomas McGovern, Research Analyst]

Got it. That's very helpful. And in terms of the bond buybacks and the deleveraging, I mean, how do you think about debt reduction going forward? And where on an absolute basis you guys want to get to on the debt balance?

[Stuart Michael Brown, President, CEO & Director]

I think -- I mean, from -- any CEO will give you the same answer, you want as little bit as possible, precisely what's happening in the market now. You don't want to be caught unaware. So I think we would like to see a recovery on price and generate more cash and pay our debt further down. We're comfortable where we are right now, but less debt for us is better.

[Samuel Thomas McGovern, Research Analyst]

Got it. That's very helpful. And then just lastly, is there any further movement on the discussions with De Beers to integrate the Kennady mine into the joint venture?

[Stuart Michael Brown, President, CEO & Director]

Yes, we've been in consultation with them. But right now, as I was mentioning in my introduction, we referred to some assets, trying to understand the extent of the northeast corridor. We believe there's more kimberlites to be added. Until we finalize that actual mine trend, we're probably not in a position to understand the economics of bringing in the Kelvin or the Faraday or all 3 of the additional parts in there. So we're still talking. We're still doing work on our project to upgrade this. But until I get a definitive answer later in 2019, it's going to be very difficult to provide that because it's a big unknown, and it's really close to the plant from a De Beers perspective. So it's not finished, but we expect to advance that later next year.

[Operator]

And our next question comes from Geordie Mark with Haywood Securities.

[Geordie Mark, Co]

Just maybe some operation point of view there. Obviously the plants been acting well on average and from comments you just said earlier, you're expecting to see that annualized guidance of just over $3 million. Do you expect that to follow through to the next year's report given the sort of the learning phases you've encountered this year? And when do you expect guidance then to come out on that basis?

[Stuart Michael Brown, President, CEO & Director]

Okay. That's a few questions there. We do expect the plant to continue performing at its current rate. It's only marginally ahead of our expectation, we're not trying to overstress the plant by forcing tonnage through. We're more looking at ways of streamlining and debottlenecking the plant, which might require minimum capital. I think we'll come up very shortly. We just in the process of finalizing our 2019 numbers. We want some more formal information on grade because we feel there's quite a movement between the state and resource grade and what we're actually getting while we're waiting from De Beers to come back to us on that. So as soon as we are, we will come out with guidance numbers in the range basis, Geordie.

[Geordie Mark, Co]

Fabulous. And maybe touching on the grade, how are you seeing sort of recovered grade reconciliation and where you're coming at, I guess, with up-edge reserves? What loads or parts will be sort of updated within that with new SFDs?

[Stuart Michael Brown, President, CEO & Director]

Yes. So we're waiting for that from De Beers. There's a lot of work going on right now to ascertain the grades. It's at the bottom of sort of factorization of the 1 millimeter cutoff to the sample cutoff. So we are reconciling resource grade into our mine core factor for every month. And we're happy with the reports and we understand the profile, but as I said, we would like to get more clarity on that before we come out with full guidance. Yes, and the Southwest Corridor work is still being worked on. So we expect to come out with that early in the new year.

[Geordie Mark, Co]

Can I touch one more point and then I'll go back in the queue. Can you remind me currently given the 3-foot range, et cetera, sort of proportion of sort of paying costs that are fixed and what sort of leverage, I guess, you had exposed to Canadian dollar?

[Perry Y. Ing, VP of Finance, CFO & Corporate Secretary]

Geordie, I believe, over 90% of our costs are in Canadian dollars, so obviously heavily exposed there. In terms of leverage, I mean, I would say the plant cost is generally fairly fixed. You're not going to get a lot of real variability. So ultimately, you'd see any additional contribution add to your margin with relatively few incremental costs.

[Stuart Michael Brown, President, CEO & Director]

I think it's the nature of where the location is, to your point. The only way to measure that is if you stop the plant, what cost would you start incurring and would basically be the sort of the consumable cost of power, but everything else will continue running along. And you would have bought your fuel anyway, so that we buy in the beginning of the year and it lasts us all year. So even that fits, you just use that on the nature of the way of the location. But I think we feel we covered on that and our selling in U.S. dollar helps us with a natural hedge against the Canadian dollar expenditure.

[Operator]

Our next question comes from Richard Hatch with Berenberg.

[Richard James Hatch, Analyst]

Just following up on the smalls market. I mean, how confident are you that this market is really credibly going to improve? Because it seems there's a lot of pressure there. Or you see -- what are your customers saying? Are they saying that a 10% cut is enough or do they need more to be sustainable? I'm just trying to get a handle. And also, do you have any feel or handle on the inventories that they're holding at the moment, whether they've got too much inventory, limited inventory, kind of about stable inventory? Perhaps start with that one.

[Stuart Michael Brown, President, CEO & Director]

Okay. Reid, you want to go first and I'm going to comment on the market. But I would say on price we don't set price, but we believe we're selling at market price. We're not bullying our customers into it and beating them up until they pay. This is entirely voluntary on their behalf. So we think we've been selling at market prices. We know we have, whether the De Beers have or not in their models. As you know, it's completely different on a contract, it's performance-based. And they've been getting that feedback. But clearly, there's not enough profits in the boxes for people who want to buy all their goods, which has led them to adopt a very flexible approach towards the end of 2018. All of that is very difficult to follow with absolute clarity since no one in this industry publishes anything of fact, as it were. And even when you see the sales results of all of these players, you don't get to know the quality or the volume of that. And the one thing I would say is that all mines, barring 1 or 2 in the world, produce all of these goods. So I have to believe the profitability is going to come back, because profitability comes back and we are heading into the biggest retail season right now and we're hearing nothing that's giving us any cause for concern that this won't be a relatively good season. So therefore, we expect to see stocks pull through. And traditionally if the price match on the rough is good and the polished is moving, then we should see a better stability or confidence, whether we see price increases or not. But I have to believe that prices are going to increase over time. Do you have anything to add to that, Reid?

[Reid Mackie, Vice President of Diamond Marketing]

No, I agree. I think that important note is that we have been selling to this period, which is in these articles, which is different from De Beers, because they had a policy of deferring the goods from August, which I know is they're allowed to defer the goods and then in the most recent sale in October, from what we understand, there was a very high level of rejections at that current price book. So because we were selling a bit at the time, we've had a pretty clear line of sight in the trajectory of those prices. And as I mentioned earlier, alluded to an earlier question, we actually see some improvement in terms of competitive metrics or competition metrics that are tendered increase bid, increase dealing. And so nothing that would suggest that there's -- and a bad further abandonment of the article, but more in the short to medium term here people have set the new price for it and De Beers is finally catching up with that price.

[Geordie Mark, Co]

Okay. That's really helpful. My next question is picking up a couple of your comments. First one on the plan and, Stuart, forgive me if I missed any of this, is there any consideration whatsoever to adjust the bottom car, appreciate the volume gain as well? Is that something you're kind of considering? Or you're just going to hold fast for the moment?

[Stuart Michael Brown, President, CEO & Director]

No, we're definitely looking at all options, Richard. And De Beers were running with that. We just suggested it, they think it's a good idea to look at in theory, but unless you can up your tonnage, sometimes the market's negative to do that. But definitely, all of that work's ongoing. We have kind of a blank sheet of paper, look at all the things you could do. And that's why we're working very well with De Beers on that perspective.

[Richard James Hatch, Analyst]

Yes, makes sense. And then just on this Hearne product, you talked about the color distribution variance. Can you just -- perhaps you can expand a bit on that?

[Stuart Michael Brown, President, CEO & Director]

Yes. Reid, do you want to cover that, please?

[Reid Mackie, Vice President of Diamond Marketing]

Yes, sure. Without going -- you can't get into too much detail because it is a preliminary based on a few focused mining samples here. But yes, there seems to be slightly finer and there is a brown content that's slightly larger than we've seen in the past. But in terms of color and quality with what we've seen in the past is as more volumes have come through, you see a convergence really in color and quality, I think, between the pipes. It's more inside frequency distribution, I think is the real difference here.

[Geordie Mark, Co]

That's helpful. And then my last one before I hang up, let you go, I just wanted to learn what's the biggest bottleneck to pushing throughput?

[Stuart Michael Brown, President, CEO & Director]

I believe it's called a thickener, dewatering and water management on that is not a major issue, but we must look to have another one, which will allow us to do that. There's more to do with the pond's DMS section, which again it's all linked. It is not simple as this will change the capital to middle or we'll add another sector in ore work, it's everything works in parallel and then in series as well. So that's why there's quite a lot of work going on in that right now, but no major capital required.

[Operator]

And our last question comes from Scott MacDonald with Scotiabank.

[Scott Macdonald, Associate Analyst]

Just wanted to circle back on the Hearne, just to clarify. You said it's finer and there's more brown. So that's relative to your resource model or was that relative to 5034?

[Stuart Michael Brown, President, CEO & Director]

I can't answer...you go...

[Reid Mackie, Vice President of Diamond Marketing]

It is very early days, and I think we have to caution that. And we're giving kind of a little value sample. But it's compared to 5034 and the goods that we've seen to date. So hence my comment and that as we've moved, we have seen this kind of convergency, stability for lack of a better word, in the quality and color as the volumes pick up. So there is potential for that. So I wouldn't get hung up too much on the actual quality or color differences to that comment.

[Stuart Michael Brown, President, CEO & Director]

Yes. Scott, we've just been running one source of kimberlite. The Hearne kimberlite is made up of a different series of kimberlite, so different facies. And we're just moving into a new facies right now. We will be taking some samples later in the year. So as I said, it's very early days, but we hope to see an improvement in price and product.

[Scott Macdonald, Associate Analyst]

Okay. And how about the grade at Hearne so far? Is that also -- are you seeing positive reconciliation there like you did at 5034?

[Stuart Michael Brown, President, CEO & Director]

Yes. We're seeing the same kind of a little bit of the same over performance on grade against the resource grade. Yes, we're seeing similar performance. So the plant is consistent with that material.

[Scott Macdonald, Associate Analyst]

Okay. And so maybe on an overall sort of revenue per tonne basis, is it more or less in line with your expectations? Or is it a little bit below or a lot so far?

[Stuart Michael Brown, President, CEO & Director]

I think it's in line with our expectations with the backdrop of the current pricing market has taken us down to where we would have liked it to have been. But yes, so in line with expectations.

[Scott Macdonald, Associate Analyst]

Okay. Maybe just moving on to your discussions with De Beers. You mentioned, I think, that you'd have something wrapped up into a new maybe an updated mine plan, did you say late 2019, is that...

[Stuart Michael Brown, President, CEO & Director]

Yes. There's quite a lot of moving parts, because every time you find more kimberlite you can do a mine design and then it's gets bigger. So that's not self-integrating with the Tuzo cut as well, so then you want to start broadening your mines, and thinking, well are you going to have 2 cuts or 1 cut? But until you've delineated the actual volume of kimberlite, it's very difficult to do that. As you know, we added [ becurey ] and we saw a little bit more work there. So it's all dependent on strip pressures and then value on the ground and we've yet to prove anywhere close to the value on this. So that's why I said it's going to take us another -- a good 10 months' worth of work that we'll be planning over the next 10 months to try and understand to which facies those extra kimberlite belong to, what are the value of the diamonds, get the dollar per tonne of revenue on the ground and then can we mine it and strip it. So there's a huge amount of work that has to go on over the next period on that. It's good, though. [ It's nice to have ] kimberlites.

[Scott Macdonald, Associate Analyst]

Yes. Appreciate there's a lot of moving parts. A good problem to have, I guess, but -- so we should look for something no earlier than late 2019, it sounds like.

[Stuart Michael Brown, President, CEO & Director]

It's going to second half of 2019 before -- we'll report as we get more information on the drilling. But actually, on mine planning and design and grades and confirmation and value, I think that's going to take us a while. There's a lot of work to do on that.

[Scott Macdonald, Associate Analyst]

Right. And I presume, based on your earlier comments, you would expect additional agreement with De Beers regarding the Kennady assets until you sort of updated that Gahcho Kué mine plan.

[Stuart Michael Brown, President, CEO & Director]

Yes, I think that's entirely sensible on this. Obviously, we would like to do something sooner, but until we know the size of the added price we can't work out where Kelvin-Faraday slots in.

[Scott Macdonald, Associate Analyst]

Sure. It's make sense. Maybe just one last one. You mentioned you might look to improve -- not only debottleneck the plant to get this throughput up but also improve the quality of the feed, I think you said. Could you elaborate a little bit on how you might achieve that?

[Stuart Michael Brown, President, CEO & Director]

Yes. We've got, I mean, all or most kimberlites have some form of internal waste, and mining on the contact brings waste into the equation. And anytime there's waste that goes through the plant is completely barren and costs money. So we're looking at potential ideas on them. They've done some testing on waste sourcing. Early days pioneering on that, but if we could do that relatively inexpensively and prove that up then just upgrade the quality of the ore going through the plant.

[Scott Macdonald, Associate Analyst]

Great. Makes sense. Okay. I might be wrapped up with the new mine plan if you...

[Stuart Michael Brown, President, CEO & Director]

Yes. All of us sit together, which is effectively designing our whole new mine with new parameters and new plant [ facilities ] and a great differentials, bottom [indiscernible] . So yes, if you can do that, that improves the dollar per tonne of revenue in the ground and therefore makes your mining easier, stripping easier the justification therefore we are. So we see 2019 as a year of a lot of work. And while we wade through this sort of retail rough diamond markets.

[Stuart Michael Brown, President, CEO & Director]

Sounds like you guys will be keeping yourselves busy. One more question from Geordie Mark and then we can go.

[Operator]

And we do have a follow-up with Geordie Mark from Haywood Securities.

[Geordie Mark, Co]

Just a quick question on just thinking around open pits and pit modeling. Any revised sort of insights into steepening the 2 wall angles or how they're holding up versus the revised sort of softening of the angles a while ago?

[Stuart Michael Brown, President, CEO & Director]

There's no immediate update on that, Geordie. De Beers continuing to monitor that for bench sizes and height, and certainly working to a potential of the pit widening in the northwest as we go off towards choose where there are some areas where we've -- we're happy with the foot angle. So they're are doing continual tests work on that. There's obviously a degree where we can steepen that by quite a few thousand tons. So that work's ongoing, but again, it's going to be all incorporated into the potential new pit design. So again, early days on that. Okay. I think we've come to the end of our questions. So thanks very much for everyone for dialing in. We appreciate your time. Rest assured that we are very cognizant of the external market, the pressures we face, the pressures of share price, shareholder desires and we're working very hard to ensure that we can try to satisfy all of those desires with the respect that it deserves. Thank you very much.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect, and have a great day.