An Alberta court decision could ensure the Diavik Diamond Mine still has a future.
DDMI has been given permission by an Alberta court, whose decision had been expected two weeks ago, to sell-off Dominion’s share of diamonds produced at the Diavik Diamond Mine. The decision will allow DDMI, a subsidiary of Rio Tinto, to recoup a portion of the $120 million it paid to cover Dominion’s share of the operation costs.
Dominion’s financial troubles have prevented the company from paying its share of the operation costs since it entered creditor protection back in April. Combined with the selling of the Ekati mine to Dominion’s parent company failing, and the continued operation of both mines was at risk. Around 1,000 workers are employed between the two mines.
But DDMI will be appealing to have the decision amended, saying the way the decision structured how the sell-off of assets can be conducted could hurt DDMI.
“Some of the conditions imposed in the court’s endorsement, however, create doubt on whether the monetization will be sufficient to recover the outstanding payments missed by Dominion and provide the funding needed to plan for ongoing operations,” a spokesperson for DDMI said in an email.
The current decision has DICAN, an external evaluator, determining the value of the assets, which wouldn’t include the cost of selling the diamonds, according to the Diavik spokesperson.
DDMI is appealing with the hopes of being able to sell the diamonds closer to market value rather than the value determined by DICAN, and use that to collect on Dominion’s debt.
Dominion, who owns 40 per cent of the Diavik mine, have been unable to pay their share of operation costs since the company entered creditor protection back in April.
The total debt Dominion has racked is nearly $120 million, plus more than two million in interest, according to an affidavit from October 30.
Previously Rio Tinto had refused to front more cash until it secures repayment on the $120 million Dominion already owes. That could have put operations at Diavik at risk.
“The court’s recent decision that Diavik Diamond Mines can start monetizing some of Dominion’s 40 per cent share of diamonds produced at Diavik is an important step,” added the spokesperson. “This will compensate for at least part of the payments Dominion has missed so far, that Rio Tinto has covered to keep the Diavik mine in operation.”
At the Ekati Mine, Dominion announced they would be recalling 60 furloughed staff after news their creditors would allow the company to restructure its finances.
The staff will be brought back to work with restarting the mine’s operations in mind again.
Operations at Ekati have been suspended since March because of the COVID-19 pandemic, and most of the staff at the mine have been furloughed or laid off as Dominion struggled to raise the capital to restart operations.
Presently, Dominion’s creditor protection — a pause button on paying the company’s debts — lasts until December 15.
But with Dominion’s creditors allowing the company to restructure its debts — agreeing with the creditors a lower debt payment for the company to pay back — Dominion will have the cash flow available to look toward restarting operations at Ekati.