Operational Challenges Temper Burgundy’s Q1 Output Amid Transition to Point Lake

Operational Transition and Challenges

Burgundy Diamond Mines Limited (ASX: BDM) has marked a significant milestone in its March quarter report by completing the operational transition from the Sable open pit to the Point Lake open pit at its flagship Ekati mine. This move, while strategic for long-term efficiency, resulted in a 57% decline in ore tonnes mined and a 46% reduction in ore processed compared to the prior year quarter. The transition was not without its challenges, including wet and muddy conditions that temporarily disrupted ore supply, and cold winter weather that affected underground operations at the Misery mine.

Despite these hurdles, the company managed to recover 0.8 million carats at an improved grade of 1.4 carats per tonne, a 25% increase in carats recovered per tonne processed compared to the previous year. Waste tonnes mined surged by 81% as Point Lake waste stripping ramped up in preparation for commercial production.

Sales Performance and Financial Health

On the sales front, Burgundy sold 1.2 million carats during the quarter across three auction events and other channels, generating US$73 million in revenue at an average price of US$62 per carat. This represented a decline from Q1 2024’s US$118 million revenue and US$89 per carat average price, primarily due to the sale of lower quality inventory carried over from the previous year. The diamond inventory valuation stood at US$48.4 million, below the typical range, reflecting the ongoing transition between mining areas.

Financially, the company reported an adjusted EBITDA of US$6.5 million and ended the quarter with a strong cash position of US$38.8 million. Net debt, including diamond inventories, was minimal at US$1.0 million. Notably, Burgundy secured a diesel fuel offtake agreement with a subsidiary of Macquarie Bank Ltd, an innovative deal aimed at improving working capital and potentially extending over multiple years.

Mine Life Extension and Strategic Outlook

Burgundy is advancing its mine life extension initiatives with drilling and resource update work ongoing at the Misery underground mine. The company is on track to release its first Burgundy-developed mine plan by the end of Q2 2025, which is expected to solidify mine life to 2030, underpinned by upgraded reserves. A longer-term mine plan, anticipated in the second half of the year, could extend operations into the mid-2030s.

Operational improvements are expected in Q2 as Point Lake open pit moves into full ore production, supported by bulk sampling to better understand ore characteristics. Prefeasibility studies for the Fox and Sable underground projects are also progressing, alongside ongoing cost reduction efforts and capital expenditure optimisation.

Looking Ahead

With three sales events planned for the next quarter and continued exploration and development activities, Burgundy is positioning itself to capitalize on its vertically integrated diamond business model. The company’s focus on operational efficiency, working capital management, and mine life extension will be critical to sustaining its market position amid fluctuating diamond prices and operational challenges.