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Burgundy Diamond Mines (ASX:BDM) has inked a deal with a subsidiary of Macquarie to better supply its Canadian arctic-based Etaki operations with fuel.
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Under the deal, Macquarie takes ownership of “diesel in the Etaki [project] fuel tanks and supplies diesel to Etaki as it is required.” This is in contrast to Burgundy’s former approach: Have another mob deliver the fuel to site once a year, which Burgundy noted on Monday typically caused “capital challenges.”
Under that agreement, the company saw massive swathes of its yearly CapEx all hit in one big window. This deal, in Burgundy’s eyes, is much more desirable.
In short, the company expects to net US$45M as a ‘cash inflow benefit’ to be realised during the current quarter. The deal is early-stage: Burgundy said its new deal with Macquarie has the potential to be a multi-year contract.
A cash inflow benefit – while somewhat unclear – of US$45M could be a good thing for the struggling company. One-year returns are down just shy of -80%.
An expansion of Etaki was culled in September last year after pressure from locals, throwing into some question the future of a diamond mine in production since ’98.
The company had to go underground right before COVID-19 hit – its underground mine is called Misery, for some reason – and hit commercial production in 2021, even as the world went mad around the company.
This saw shares hit an all-time high of 40cps, but since then, the market has been risk-off.
Burgundy later kicked off CY2023 by going into a multi-month suspension, recovered from that, but clearly failed to regain confidence thereafter. Having 1.4B shares on issue also has liquidity implications.
Still, the news on Monday was enough to prompt some to get back into BDM. The price jumped 8% on $50,000 worth of trades, according to a third-party service porting Morningstar data.
There are concerns from some detractors which ultimately paint the picture of Burgundy having bought a lemon. Late last year, one writer for Canada’s Up Here Business Magazine put it to readers De Beers is pulling out of diamond mining in the region in 2031; competitor Diavik will wrap up production as soon as next year.
BDM last traded at 5cps.
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