Dominion Diamond proposes transaction to exit CCAA status, reopen Ekati mine

Dominion Diamond proposes transaction to exit CCAA status, reopen Ekati mine

CALGARY — The owner of the Ekati diamond mine is proposing a transaction that would allow it to exit court protection from creditors, provide operating funds and eventually restart the suspended Northwest Territories mine.

Dominion Diamond Mines ULC announced Friday it has signed a letter of intent with an affiliate of The Washington Companies under which an entity to be managed by Washington would buy its assets for about $177 million while assuming its operating liabilities.

Under the deal, which requires court approval, Washington would also provide Dominion with up to $84 million in short-term debtor-in-possession financing.

Operations at Ekati have been suspended since March to prevent spread of the COVID-19 pandemic.

The virus’s negative impact on diamond transport and marketing was also cited by the company in its court filing for Companies’ Creditors Arrangement Act protection in April.

“The Washington Companies’ proposal is to acquire Dominion’s assets and operating liabilities out of the CCAA process, with a substantially restructured balance sheet and new arrangements with its creditors, vendors and other stakeholders,” said Dominion spokeswoman Rebecca Hurl in an email.

“This restructured company would be better-positioned for the future. The proceeds of the sale would go to Dominion’s existing creditors, cover certain charges approved by the court and provide ongoing liquidity for Dominion through the CCAA process.”

The Washington Companies, a Montana-based group of privately held companies, bought Dominion for US$1.2 billion in 2017.

The acquisition offer would serve as a base bid for the assets under a court-supervised bidding process to win the highest or best offer, including an auction if necessary, Dominion said.

The sale process would be expected to close in the coming 90 to 120 days, it added.

Dominion also owns 40 per cent of the Diavik mine operated by Rio Tinto, located near Ekati about 300 kilometres northeast of Yellowknife.

The proposed sale would be conditional on reaching an agreement with Rio Tinto on the Diavik joint venture, it said.

Failing that, the assets being sold could exclude the Diavik interest.

In an affidavit filed with the Alberta Court of Queen’s Bench in April, Dominion chief financial officer Krystal Kaye said the pandemic has had a “devastating impact” on the global diamond mining industry.

Travel and business lockdowns were felt most keenly in India, where most of the world’s rough diamonds are sorted, cut and polished; in Antwerp, Belgium, where they’re sold; and the United States, the top buyer of diamonds for retail sale, she said.

Dominion’s high debt levels made it impossible for the company to continue its business as usual, Kaye said in the filing.

Dominion had revenue from diamond sales of about US$528 million in 2019, the affidavit said, but the shutdowns in India and Belgium had trapped diamond inventory from Ekati and Diavik with book value of about US$180 million.

According to the affidavit, Dominion is one of the two largest non-governmental employers in the Northwest Territories, with about 40 per cent of its 634 Canadian employees being northern residents and 60 per cent of those people being Indigenous people. It also employed 425 contract workers in 2019.

This report by The Canadian Press was first published May 22, 2020.

Dan Healing, The Canadian Press

mining

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Town of Castor to open tenders to replace garbage truck

Council decided to purchase a used rear load garbage truck to replace the existing the one

Gov’t of Alberta confirms 29 new COVID-19 cases

Of the total 6,955 confirmed cases, 652 are active

Town council moves to re-open community playgrounds

Highlights from the Town council meeting of May 25th

Stettler area brothers put creative skills towards superb causes

Clay and Porter Kneeland are constructing hydro-dipped birdhouses

VIDEO: Procession to honour Snowbirds Capt. Jennifer Casey comes to Halifax

Snowbirds service member died in a crash in Kamloops one week ago

Kelowna, B.C., man charged with murder in Alberta killing

A second man is also wanted in connection with the first degree murder of Cody Michaloski

PHOTOS: Loved ones reunite at an oasis on closed U.S.-Canada border

Officials closed the park in mid-March over coronavirus concerns

Trump preparing order targeting social media protections

“This will be a Big Day for Social Media and FAIRNESS!”

USMCA poised for star turn in trade spotlight as White House sours on China

Pandemic accelerates U.S. efforts to pull back from China

Legal experts weigh in on Meng Wanzhou decision from B.C. Supreme Court

The court will now hear arguments about whether Meng’s arrest was unlawful

If an MP heckles in a virtual House of Commons, does it make a sound?

If an MP heckles in a virtual House of Commons, does it make a sound?

How much will be enough when it comes to Canada’s COVID-19 supply?

How much will be enough when it comes to Canada’s COVID-19 supply?

Most Read