Parent company agrees to buy troubled Dominion’s assets for US$126M
Dominion Diamond Mines has agreed to sell “substantially all of its assets” to its parent, The Washington Companies, for US$126 million in cash and the assumption of its debts.
Dominion, which owns the NWT’s Ekati diamond mine and holds a 40-percent stake in neighbouring Diavik, has been in creditor protection since last month after running out of money to pay its bills.
The company said it couldn’t earn any revenue as the Covid-19 pandemic was stopping the delivery of diamonds from Ekati to facilities in India, while diamond trading floors in Belgium were closed.
The Washington Companies, which bought Dominion as a whole for US$1.1 billion in 2017, has now agreed to spend US$126 million buying out the company’s assets.
Patrick Merrin, Dominion’s interim chief executive, told staff by email the final bid value amounted to more than US$400 million as a new entity set up by Washington will also assume responsibility for Dominion’s existing debts.
Whether the sale includes Dominion’s share in Diavik remains to be decided.
The Washington Companies is holding discussions with Rio Tinto, which owns the other 60 percent of Diavik. If no agreement is reached, that share in Diavik could be sold by Dominion to Rio Tinto or another bidder.
Diavik Diamond Mines (2012) Ltd, the Rio Tinto subsidiary known as DDMI that runs Diavik, is currently paying Dominion’s share of Diavik operating costs since Dominion doesn’t have the money.
In return, DDMI has been granted permission by a court to hold back Dominion’s May share of Diavik diamonds as a form of security.
Meanwhile, Washington is providing Dominion with US$60 million in short-term financing to help it meet commitments.
Brendan Bell, former Dominion chief executive and now an independent member of the company’s board, said in court documents the proposed sale would mean “the continued employment of nearly all of Dominion’s employees and the maintenance of a business partner to the significant number of companies, First Nations, and local communities who conduct business with Dominion.”
Another buyer could emerge
The bid is a stalking-horse bid, which means someone else could yet come in and buy Dominion’s assets.
A stalking-horse bid sets the minimum price for which Dominion’s assets can be sold, but the company will in effect be placed up for auction in a process expected to last throughout the summer.
Other corporations will be allowed to place bids of their own and could feasibly outbid Washington.
However, Bell noted in an affidavit that Washington was the only party to formally bid for Dominion in 2017.
An Alberta court must formally approve Washington’s bid, and the proposed sale process, later this month before it can go ahead.
Dominion has also asked the court to extend creditor protection until at least August while the sale process takes place. A court hearing is anticipated on May 29.
The company’s proposal includes the setting aside of hundreds of thousands of dollars to pay key employees bonuses for staying on during that process. The size of those bonuses, and who gets them, was kept confidential in documents filed with the court.
The Ekati mine remains in care-and-maintenance mode with most employees furloughed during the Covid-19 pandemic. It is the only one of the NWT’s three active diamond mines to have closed.
Merrin told staff “we do not expect any immediate changes to the current state of operations.”
In a news release, Dominion said the proposed deal would ensure Ekati can eventually reopen and bring back furloughed workers, ensure payments to employees and businesses can be met, and make sure Dominion keeps in compliance with health, safety, and environmental regulations.