DDMI criticizes Dominion over creditor protection, Ekati closure

Last modified: May 1, 2020 at 5:43pm

Managers of the NWT’s Diavik diamond mine say they were kept in the dark about the severity of part-owner Dominion Diamond Mines’ financial situation.

Dominion, which owns the nearby Ekati mine as well as 40 percent of Diavik, was granted creditor protection last month. The company said it can’t sell diamonds during the pandemic and can’t pay some large bills.

In a court filing, one of the people running Diavik claims Dominion has acted in a way that shows “no regard for the welfare and vulnerability” of NWT businesses, employees, and communities.


The filing argues that unless a court intervenes, Dominion’s plans could ultimately “have the effect of closing the Diavik mine.”

Creditor protection allows Dominion to press pause on most of its debts, giving it time to restructure or find new investment.

On April 22, Dominion not only entered creditor protection but also missed a $16-million payment to Diavik Diamond Mines (2012) Inc, usually referred to as DDMI. DDMI is a subsidiary of Rio Tinto and holds the controlling interest in Diavik.

Dominion and DDMI operate Diavik as a joint venture. The agreement is that DDMI pays all the costs (salaries, suppliers and so on) and then Dominion makes regular payments to cover its share.

In an affidavit provided to an Alberta court this week, DDMI’s finance manager says at a meeting between the two companies on Monday, April 20, Dominion made no mention of a plan to enter creditor protection two days later.


Finance manager Thomas Croese says Dominion also didn’t mention creditor protection a week earlier, when Dominion’s interim chief executive, Patrick Merrin, asked for the $16-million payment to be pushed back a week from April 15.

Croese adds that Dominion seems, in its own court documents, not to have accounted for almost $60 million in forthcoming payments related to Diavik between now and July.

Croese says DDMI will step up to cover the extra costs for the time being but, in return, will keep back Dominion’s share of diamonds from Diavik as a form of guarantee. Once Dominion pays up later on, it’ll get its diamonds back.

Since Dominion says it can’t sell any diamonds right now, DDMI argues holding some of them back shouldn’t hurt Dominion anyway – although DDMI says its own staff have been able to get diamonds to trading floors in Belgium then find ways to sell them. (Dominion last month said it couldn’t get Ekati’s diamonds out of Canada or sell any.)


Croese’s document hints at other, recent correspondence between the two companies that appears to have been less than friendly in nature, but those letters are not available to the public.

Winter road payments due

Croese’s affidavit argues DDMI needs an amendment to a court order to be allowed to cover Dominion’s costs at Diavik for the foreseeable future – and hold back the diamonds.

Not granting the request would, Croese says, “cause immediate and material prejudice to DDMI and the ongoing operation of the Diavik mine.”

He claims now is the worst time for Dominion to be defaulting on payments, because DDMI needs to pay bills associated with hauling a year’s worth of supplies and equipment to Diavik during the winter road season.

Referring to the NWT’s chief public health officer and her advice, Croese also questions Dominion’s decision to suspend operations at its Ekati mine.

“Dr Kami Kandola has emphasized in public remarks that the welfare of workers and their communities depends on continued employment and sustained investment,” Croese writes.

“Unfortunately, not only does the effective closure of the Ekati mine deprive its workers and the communities which they support of such benefits, but the proposed terms of [Dominion’s creditor protection] show no regard for the welfare and vulnerability of stakeholders in the Northwest Territories – vendors, employees, contractors – and of the northern and Indigenous communities reliant upon their incomes, as it could have the effect of closing the Diavik mine.”

An Alberta court decision on Croese’s request was due on Friday. Dominion has also, separately, filed a request for an amendment that will keep it in creditor protection until at least June.