Dominion Diamond Mines will come out of creditor protection stronger, even if it takes months, the company’s interim chief executive told staff on Friday.
Patrick Merrin, in his role since February, delivered a short, prepared statement to employees who were invited to dial in to a conference call. He took no questions following his message.
Dominion owns the NWT’s Ekati mine and has a 40-percent share in neighbouring Diavik. The company filed for protection because it can’t sell nearly $200 million in diamonds being held up by restrictions related to the Covid-19 pandemic.
The inability to sell diamonds means Dominion for the time being has no cash to pay its bills, which amount to millions of dollars per week.
In his message to staff, Merrin reiterated three times in the space of five minutes that Dominion is not on the verge of bankruptcy and has a plan to emerge from protection in a solid financial state.
“This does not mean that Dominion is bankrupt or going out of business. I want to repeat that. We are not bankrupt or going out of business,” Merrin stated.
“To the contrary, the process we have entered allows us to pursue a controlled restructuring.”
The company had issued a similar statement to Cabin Radio a day earlier.
Merrin said this week’s announcement marked the beginning of a “months-long process,” after which he believes the company will be “well-positioned to generate cashflow from our significant diamond inventory.”
In the meantime, the Ekati mine will remain in care-and-maintenance mode with a skeleton staff. More than 400 employees are currently furloughed after the mine suspended operations owing to the pandemic last month.
Washington offer is ‘a strong endorsement’
Entering creditor protection lets a company temporarily pause its debts to pursue one of three rescue measures: restructuring, finding extra investment, or finding a buyer.
For example, Great Slave Helicopters found a buyer when it went through creditor protection in the fall of 2018. In February this year, a similar process saw a deal reached to sell some of northern trucking company Ventures West’s assets to another firm, then auction off the rest.
Merrin told Dominion staff he thinks the company will be able to access new money from its parent, The Washington Companies, to help get things going again.
“We have and are considering a proposal from The Washington Companies, Dominion’s current owner, to provide near-term financing,” said Merrin. “This would help provide sufficient liquidity to operate the Ekati mine.”
Washington’s offer to provide that money, he said, was “a strong endorsement of our business and go-forward prospects.”
The NWT’s industry minister, Katrina Nokleby, told Cabin Radio on Thursday she had spoken with Dominion and had been “reassured … this meant nothing as far as the securities and bonds in place for reclamation and clean-up” at Ekati and Diavik.
“There are no issues around regulatory compliance not being met,” Nokleby said the company had told her.
“Given the nature of the conversation it was, overall, a fairly positive discussion,” the minister continued.
“We’ve all been aware for a while that our economy was having some challenges. It hasn’t come as a shock, however, of course it’s concerning.
“We’re doing everything we can to support our resource sector so that, when we get through Covid-19, we have an industry to come back to.”
Premier Caroline Cochrane earlier told Cabin Radio a request for the territory’s mining industry to receive more federal support would come as part of a “strategic” approach to Ottawa.
She had been defending her decision not to publicly endorse a letter from the territory’s chamber of mines lobbying the federal government for help.
‘Committed’ to employees
Dominion will need the pandemic to recede and restrictions ease to be truly sure of its longer-term security.
In particular, the company needs to be able to resume shipping diamonds from Canada to its sorting facility in India, then sell those diamonds on trading floors in Belgium that have been closed for a month due to Covid-19.
Merrin also did not refer to credit rating outlooks that had painted a bleak picture of the company’s future, amid weak diamond markets, even before the pandemic. He is Dominion’s fifth chief executive in five years and the third since Washington bought the company in 2017.
He did, however, tell employees the company would remain “committed to protecting your interests” during the time it took to get Ekati reopened. A timeline for that to happen has not been set.
Closing the call, Merrin added for the third time: “We are not going bankrupt.”