Why Is Burgundy Diamond Mines Putting Point Lake on Hold Despite Rising Carat Recovery?

Operational Performance Highlights

Burgundy Diamond Mines’ Q2-2025 results reveal a nuanced operational picture. The company mined more ore and recovered more carats compared to the previous quarter, largely due to ore released from the Point Lake open pit. However, the overall grade of ore processed declined by 26%, reflecting a higher proportion of lower-grade open pit ore in the blend. This shift impacted the revenue per carat, which fell as the company included more of the relatively lower-value Point Lake ore in its sales mix.

Despite the increased volume of carats recovered, revenue dropped 6% to US$471 million, and adjusted EBITDA fell sharply by 29%, underscoring the pressure on profitability from the lower grade and value of ore mined.

Financial Position and Cash Flow Challenges

The company’s cash balance declined significantly to US$7.2 million by the end of June 2025. Major cash outflows included US$29.5 million spent on Point Lake waste pre-stripping, US$10 million in capital expenditures, and a US$13.3 million fuel offtake repayment to a Macquarie Bank subsidiary. These expenditures highlight the capital-intensive nature of the mining operations and the financial strain from the ongoing development activities.

Strategic Shift – Point Lake on Care and Maintenance

In response to the uneconomic conditions at Point Lake, Burgundy has placed the mine on care and maintenance as of July 2025. This decision follows bulk sampling results that indicated the current diamond prices do not support profitable operations at Point Lake. The company retains the option to restart mining there if market conditions improve, but the immediate focus is shifting away from this asset.

Focus on Misery and Fox Underground Extensions

Burgundy is pivoting its mining efforts towards the Misery underground mine and the Fox underground project. The Misery mine life has been extended by 2.5 years to the end of 2027, supported by a geological model update that incorporated new drilling data and revealed a larger orebody than previously understood. Production improvements at Misery have been significant, with daily underground mining rates exceeding prior averages and new production records set in July.

Meanwhile, the Fox underground pre-feasibility study outlines a robust economic case for a 14-year mine life extension. The study highlights a revised mining method and material handling system that reduce capital expenditure requirements. With a post-tax net present value of US$272 million and an internal rate of return of 30% at US$250 per carat, Fox represents a critical long-term growth opportunity for Burgundy.

Looking Ahead

Burgundy is implementing cost control measures, including vendor contract negotiations and operational batching to reduce fixed processing costs. The company is also maintaining flexibility to resume Point Lake operations if conditions improve and is exploring potential mergers and acquisitions to strengthen its portfolio. The strategic emphasis on extending mine life at Misery and developing Fox underground positions Burgundy to sustain production and value creation despite near-term challenges.