Dominion Diamond Mines ULC, the owner of Ekati Diamond Mine, says it intends to sell “substantially all” of its assets to its parent company The Washington Companies.
According to a news release, Dominion has signed a letter of intent, that would see “an entity” managed by Washington buy its assets for about US$126 million in cash ($175 million CAD), and also provide up to US$60 million ($83 million CAD) in short-term debtor-in-possession financing. Washington would also take over all of Dominion’s operating liabilities.
Washington bought Dominion in 2017 for US$1.2 billion.
Dominion says the deal—which still has to be approved by an Alberta court—would allow the Ekati mine to resume operations.
The mine has essentially been shut down since March.
The company says it would also allow it “to pay or meet obligations owed to employees, including pensions obligations, and to remain a significant employer and corporate citizen in the Northwest Territories.”
It adds that it will continue to abide by health and safety regulations as it recalls employees to the Lac de Gras site.
Dominion and Diavik
Dominion filed for bankruptcy protection a month ago, after saying it couldn’t pay for its 40 per cent stake in Diavik Diamond Mine due to the diamond market downturn caused by COVID-19.
The sale, as it’s currently laid out, of its asset to Washington will depend on Dominion reaching another agreement with Rio Tinto, Diavik’s majority owner. If they do not reach an agreement, then the sale will not include Dominion’s portion of Diavik.
Under the letter of intent, the Washingto entity will serve as a stalking horse bidder (essentially a minimum bid) in a court-approved bidding process for Dominion’s assets. If Dominion gets “one or more higher and better offers” then the deal can be cancelled.
The company said it expects the sale to go through quickly and close in three to four months.