The owner of the Ekati diamond mine, the largest in the Northwest Territories, has filed for bankruptcy protection.
The Court of Queen’s Bench of Alberta has granted Dominion Diamond Mines protection under the Companies’ Creditors Arrangement Act (CCAA).
The company said in a news release that it would use the window created by the protection to speak with “lenders, creditors, equity owners and other stakeholders to solicit and evaluate strategic alternatives to restructure.” That could include selling the mine.
Dominion says the impact of COVID-19 was a contributing factor to its filing for protection.
The company says it has a “strong diamond inventory” but the pandemic has made it difficult to get them to market. “Currently there is no ability to generate sufficient revenue to support Dominion’s ongoing financial obligations.”
Part of those obligations include its 40 per cent stake in the Diavik diamond mine.
As part of the CCAA process, Kristal Kaye, Dominion’s chief financial officer, submitted a 148-page affidavit.
It explains the difficulties brought on by the pandemic: “Amidst the global shutdown of commercial trade and travel attributable to the COVID-19 pandemic, Dominion’s ability to move its rough diamond inventory from the point of extraction at the Ekati and Diavik Mines to Dominion India’s sorting facilities in India for further movement for eventual sale on the world market through Dominion Belgium’s sale centre in Antwerp has been effectively frozen.“
That inability to sell its diamonds means Dominion cannot make the $16 million payment to Diavik as part of regular operations. That payment was due on Wednesday, April 22.
During the CCAA process, Dominion is turning to its parent company, The Washington Companies, to “provide sufficient liquidity.”
For this to happen, Dominion has to accept a memorandum of understanding from The Washington Companies for a possible asset sale. The sale would be to ensure Dominion will “pay or otherwise satisfy, among other things, all obligations to employees and governmental authorities (including reclamation obligations) and all obligations under the company’s agreements with the First Nations and aboriginal groups.”
While under the CCAA process, Dominion will still be managing the care and maintenance at Ekati. The mine has been in this state since it sent the majority of its workers home in mid-March.