The Burgundy Diamond Mines subsidiary that owns the NWT’s Ekati diamond mine has filed for creditor protection, though the mine will keep operating for now.
Burgundy said on Friday it had obtained an order from BC’s supreme court granting protection to Arctic Canadian Diamond Company, or ACDC, which Burgundy acquired in 2023.
Companies enter creditor protection when they are heading into insolvency and need time to organize their finances before establishing how – if at all – creditors can be paid.
The news came within months of Burgundy agreeing federal loans worth up to $175 million that were designed to keep Ekati operating. What has since happened to that money is not clear. For example, it’s not known if Burgundy has yet accessed the full amount.
Despite the loan, Burgundy had remained behind on regulatory obligations and impact benefit agreement payments to Indigenous nations.
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The natural diamond market has suffered huge hits in recent years. Tariffs, particularly those placed by the United States on diamond hub India, have had a significant impact. Lab-grown diamonds have eaten into the natural diamond market because customers often see them as a cheaper alternative with no real down side.
On Friday, Burgundy said the fuel crisis from the US-Israel-Iran war was a fresh factor.
“Given these and other factors, the Company believes filing for protection [is] the most prudent course of action,” Burgundy stated.
“Burgundy has been working consistently to cut costs and recast its business plan to focus on producing the highest quality goods within its asset base.
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“Burgundy’s commitment to employees and local communities remains a priority. ACDC intends to continue mining operations at Ekati Diamond Mine during the CCAA process. Burgundy continues to believe in the long-term viability of the Ekati Diamond Mine and intends to emerge stronger, better and able to deliver value to all stakeholders.”
‘What’s the accountability?’
Frame Lake MLA Julian Morse told Cabin Radio he was not surprised by Friday’s news.
“The writing has been on the wall for quite a while,” Morse said, reached by phone shortly after Burgundy’s late-afternoon news release was issued.
What he did find surprising is that Burgundy plans to continue mining at Ekati.
“With what money are they planning to continue mining?” He asked.
“Looking at this all from the outside, there isn’t a future for Burgundy … you have to wonder at what point the jig is up?”
Morse said there are “a lot of questions to be answered” about the nine-figure loan Burgundy received from the federal government.
“What’s the accountability for that and where has that money gone? What is it being used for? How does it factor into this creditor protection?” Morse asked.
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There is also an environmental aspect to the news if Ekati were to wind down with Burgundy in creditor protection, in terms of how the eventual closure of the site is funded. While security payments to the GNWT have been made, whether that money is enough to cover the bill is another matter.
“As an NWT politician, it’s really concerning,” said Morse.
“If the mine closes and the company doesn’t have money, then we’re talking about collection of security, we’re talking about who’s going to clean up this site.”
When companies enter creditor protection, a court-appointed monitor – ordinarily an accounting firm or management consultancy – is put in place to supervise the process of rearranging the affected company’s finances.
In this instance, the monitor will be FTI Consulting. A page has been set up for documentation related to the process.
“The GNWT is closely monitoring the court proceedings and will continue to advocate for the interests of northern workers, businesses and communities as this process unfolds,” the territorial government told Cabin Radio in a statement.
“In the meantime, the GNWT continues to maintain a list of programs and supports for individuals or businesses who are impacted by resource sector issues.”
