Burgundy’s $11.6M EBITDA Loss and Inventory Write-Downs Cloud Diamond Outlook

• Ekati mine life extended by 2.5 years at Misery underground
• Q2 sales of 0.9 million carats generated US$52 million revenue
• Adjusted EBITDA loss of US$11.6 million amid inventory write-downs
• Closure of Perth cutting and polishing operations to focus on partnerships
• Fox Underground Project PFS shows robust economics with development from mid-2026

Operational Momentum at Ekati

Burgundy Diamond Mines Limited (ASX, BDM) has delivered a mixed yet forward-looking quarterly report for Q2 2025, highlighting operational improvements alongside financial challenges. The Ekati diamond mine saw a 91% increase in ore tonnes mined compared to the previous quarter, driven primarily by the Point Lake open pit. This translated into 0.8 million carats recovered, a 5% increase quarter-on-quarter, although the grade per tonne processed declined due to a higher proportion of lower-grade open pit ore.

Misery underground operations showed particularly strong momentum, with daily mining rates surpassing 3,300 tonnes and peaking near 4,900 tonnes in July. This operational step-change bodes well for sustaining production levels in the near term.

Sales and Strategic Realignment

Diamond sales for the quarter reached 0.9 million carats, generating US$52 million in revenue at an average price of US$58 per carat. This was slightly lower than the previous quarter’s US$73 million, reflecting the influence of the Point Lake bulk sample’s lower valuation of US$52 per carat. In a strategic pivot, Burgundy closed its Perth cutting and polishing facility to concentrate on forging partnerships with manufacturers, traders, and luxury brands, aiming to maximize value capture along the diamond value chain.

Financial Position and Inventory Challenges

Financially, Burgundy reported an adjusted EBITDA loss of US$11.6 million and ended the quarter with US$7.2 million in cash. Diamond inventory was valued at US$35.9 million but was subject to a significant write-down of US$7.8 million, reflecting market uncertainties and conservative valuation policies. Net debt, including inventories, stood at US$47.7 million. The company secured non-dilutive financing of US$18.5 million during the quarter, with a substantial portion repaid through diamond sales.

Extending the Ekati Mine Life

One of the most encouraging developments was the extension of the Ekati mine life. Following a successful drilling campaign at the Misery deposit, the underground mine plan has been extended by 2.5 years to the end of 2027. Meanwhile, the updated prefeasibility study for the Fox Underground Project revealed robust economics, with a post-tax net present value of US$272 million and an internal rate of return of 30% based on Ore Reserves. The Fox project is slated to commence development in mid-2026 and is expected to support a 14-year mine life, extending operations to 2040.

Additionally, the Point Lake bulk sample yielded promising results, recovering over 67,000 carats at an average value of US$52 per carat. Mining at Point Lake is anticipated to resume by mid-2026, contingent on diamond price trends.

Looking Ahead

For Q3 2025, Burgundy plans to focus on Misery underground operations, remnant ore from the Sable open pit, and processing stockpiled ore from Fox. Exploration drilling will continue to explore deeper zones at Misery, aiming to further extend mine life. The company also remains active in seeking opportunities to strengthen its balance sheet amid ongoing market challenges.

Bottom Line?

Burgundy’s operational gains and mine life extensions offer promise, but financial headwinds and market dynamics will test its resilience in the quarters ahead.

Questions in the middle?

• How will diamond price fluctuations impact Burgundy’s inventory valuation and future sales?
• What are the risks and timelines associated with the Fox Underground Project development?
• Can Burgundy’s strategic shift away from in-house cutting and polishing enhance long-term margins?