Nobody steps in to buy Ekati, mine poised to shut down for good

The NWT’s Ekati diamond mine looks set to shut down and enter reclamation after nobody bid for it in a court-supervised sales process.

Bidders had until the end of last week to make an offer for Ekati after current owner Arctic Canadian Diamond Company, a subsidiary of Burgundy Diamond Mines, entered creditor protection in May.

According to court documents made public on Tuesday, there were no bids despite 140 “potentially interested parties” being contacted.

The NWT government is now asking a BC court to send Ekati into receivership under the management of insolvency firm PricewaterhouseCoopers.

The GNWT says it’s urgent. The company is “expected to run out of all cash” in the next week, the territory states in its application to the court, and a receiver needs to step in “to oversee environmental remediation and reclamation activities.”

Receivership is terminal. Creditor protection had given Burgundy time and shelter from Ekati’s creditors to try to find a buyer or restructure, with management still running the mine. Receivership would instead hand control to PricewaterhouseCoopers, whose job would be to wind things down and deal with what’s left.

“All parties agree it will take approximately 5 weeks to responsibly and efficiently shut down mining operations at the Ekati Mine before undergoing the Reclamation work,” the GNWT wrote to the court.

“The Transition Period is critical because an immediate or disorderly termination of operations may risk causing significant environmental harm.”

The GNWT is asking the court to declare that just over $325 million held in environmental security is protected and cannot be pursued by Ekati’s creditors to help settle debts.

From May: Here’s everyone owed money by Ekati

The territory’s application asserts that Burgundy supports the mine’s entry into receivership. Burgundy has been approached for comment.

A judge is expected to hear the GNWT’s application on Tuesday.

Ottawa has sent about $185 million to Ekati in recent months in the form of various loans. A further $50 million made available to Burgundy in May was never transferred because there were no viable bids for Ekati after the July 10 deadline, according to the GNWT’s receivership application.

To what extent the federal government or any other creditors will be reimbursed is unclear. The mine had roughly $14 million in cash as of July 10 but is expected to run out this week, while diamond sales over recent weeks amounted to about $27.4 million, $2 million less than expected.

In separate documents, FTI Consulting – the court-appointed monitor of the creditor protection process – confirmed no bids had been received for the mine by the July 10 deadline. Three potential purchasers got as far as signing non-disclosure agreements, while one potential bid was dismissed as it would have required a “substantial amount of incremental financial support.”

“In the absence of further funding, [the mine’s owners] will be unable to continue to meet their ongoing operating and administrative costs and an alternative path needs to be pursued,” FTI stated.

Jobs set to be lost

The proposed receivership order gives PricewaterhouseCoopers sweeping power over Ekati’s workforce.

The receiver would be able to “effect workforce reductions, including layoffs or terminations” at its sole discretion and do so notwithstanding any collective agreement, the Canada Labour Code, or the NWT’s Employment Standards Act – including section 41, which sets out the notice employers must give when laying off groups of workers.

The Public Service Alliance of Canada and Union of Northern Workers, which represent staff at the mine, are listed among parties served with the GNWT’s application. The UNW has been approached for comment.

Court filings show the mine’s owners plan to spend about $3.5 million of their remaining cash on accrued vacation pay owed to employees, plus a further $2.1 million on payroll and related tax remittances up to Tuesday.

Under the GNWT’s proposed outline, Ekati will become the latest NWT mine to shift to government oversight of a massive remediation operation. It joins Giant Mine, a toxic former gold mine being remediated by a federally led team at a cost of more than $4 billion.

Global pressures

Ekati’s demise comes as the global natural diamond market craters.

The mine has been a pillar of the NWT’s economy for two decades. Diamond mining arrived in the late 1990s and early 2000s just as the territory was searching for an economic engine to replace gold.

However, cheaper lab-grown alternatives have gained a significant share of the diamond market, while Ekati and other mines have been buffeted by tariffs, the Iran-US-Israel war and consequent fuel crisis, and sagging demand in China.

From May: The full scale of Ekati’s problems

This week, De Beers suspended operations at South Africa’s biggest diamond mine, a sign of continuing shifts in the industry. In the NWT, the Diavik diamond mine next door to Ekati has already closed and the De Beers-operated Gahcho Kué mine is in financial difficulty.

In a teaser letter to prospective buyers, FTI described Ekati as having “significant long-term potential” to keep mining to 2039 and beyond.

But even that letter acknowledged “challenging demand conditions” and ultimately, nobody felt this was the moment to buy a steeply discounted NWT diamond mine.