Burgundy Diamond Mines Advances Point Lake as EBITDA Falls Short in 2024

Operational Performance and Market Context

Burgundy Diamond Mines Limited (ASX: BDM) released its quarterly activities report for the period ending 31 December 2024, revealing a mixed operational and financial performance. The company achieved its ore tonnes mined and processed targets for the calendar year but fell slightly short on recovered carats, missing guidance by 2%. This shortfall, coupled with a challenging diamond market, contributed to EBITDA coming in 6% below expectations.

Global rough diamond prices softened significantly during 2024, with an estimated 15-20% year-over-year decline in revenue per carat. Burgundy's own rough diamond price per carat dropped by approximately 10%, a smaller decline than the global average, reflecting some resilience in its product mix or sales strategy. Despite these headwinds, the company met its revenue guidance for the year, underscoring steady demand for its output.

Q4 Highlights and Sales

In the December quarter, Burgundy mined 0.97 million ore tonnes and processed 0.98 million tonnes, recovering 1.02 million carats at a grade of 1.05 carats per tonne. Sales amounted to 1.10 million carats, generating proceeds of US$101 million at an average price of US$92 per carat. This was a notable reduction from the prior year’s quarter, which saw 1.79 million carats sold for US$166 million, partly due to lower quality inventory remaining unsold.

The transition from the Sable mine to the Point Lake open pit was largely completed during the quarter, with Point Lake expected to enter full ore production in Q1 2025. Waste stripping activities at Point Lake are anticipated to increase, but recent mine plan optimisations have reduced the waste-to-ore stripping ratio, potentially lowering operational costs in 2025.

Financial Position and Environmental Trust

On the corporate front, Burgundy established a qualifying environmental trust with a US$58.7 million cash contribution in 2024, which carries refundable tax credits. These credits can be applied against 2024 taxable income or carried back or forward, providing a significant tax benefit estimated at around US$27 million heading into 2025. This strategic move is expected to substantially reduce the company's tax obligations for the year.

Despite capital expenditures of US$35.2 million, primarily on Point Lake waste pre-stripping and waste rock storage construction, Burgundy ended the quarter with US$25.1 million in cash and diamond inventories valued at US$63.3 million. Net debt, including inventories, was a modest US$2.5 million, reflecting a relatively strong balance sheet position amid ongoing investment.

Mine Life Extension and Future Outlook

Burgundy is advancing its mine life extension work, with drilling at the Misery Main ore body completed and ongoing activities at the Southwest extension. The company expects to release its first comprehensive mine plan by the end of Q1 2025, with a longer-term plan due in the second half of the year. This extended plan could prolong Ekati's operational life into the mid-2030s, a significant development for investors seeking long-term value.

Additional prefeasibility studies for the Sable and Fox underground projects are underway, with the Fox study expected to conclude in Q1 2025. Equipment for the Fox high-value stockpile project has been procured and is scheduled for delivery early in the year, signaling progress on multiple fronts.

Looking Ahead

In the coming quarter, Burgundy plans to focus on ramping up Point Lake production and conducting bulk sampling to refine ore and processing data. Three sales auctions are scheduled, alongside the release of the company’s audited 2024 financial report. Burgundy is also exploring non-dilutive working capital options to strengthen its balance sheet further.

While the company navigates a softer diamond market and operational challenges, its integrated business model, from mining through to cutting and polishing, positions it to capture value across the diamond supply chain. The market will be watching closely for the upcoming mine plans and how Burgundy leverages its environmental trust benefits to enhance financial resilience.