Rio Tinto subsidiary DDMI has filed a response to a lawsuit initiated by fellow mining firm Dominion, denying all allegations.
DDMI and Dominion jointly own the NWT’s Diavik diamond mine. DDMI, which owns the majority 60-percent share, operates the mine on behalf of both companies. Dominion also owns and runs the Ekati mine.
Dominion and DDMI have already clashed as Dominion goes through the creditor protection process, which has placed a question mark over Dominion’s future investment in the Diavik mine.
Last month, Dominion escalated that feud by filing a lawsuit in British Columbia alleging DDMI had operated Diavik in a manner demonstrating “willful misconduct and gross negligence.”
Dominion claimed DDMI is spending too much money to run Diavik with too little end product, alleging DDMI “continues to prioritize the interests of DDMI and Rio in its management of the Diavik mine – to the detriment of Dominion and the joint venture as a whole.”
The lawsuit claims those issues are one reason Dominion is enduring financial trouble that saw it file for creditor protection earlier this year, allowing it to pause many debt repayments while it restructures and finds a buyer.
Responding in a court filing of its own last week, DDMI rejected Dominion’s two key allegations of breach of contract and breach of fiduciary duty.
DDMI argues the agreement that governs how Diavik is run expressly rules out any fiduciary duty between the companies (in other words, any obligation to act in the best interests of the other party).
DDMI says it has run the mine “in a good, workmanlike, and efficient manner” and “in accordance with sound mining principles and all other applicable industry standards and practices.”
In particular, DDMI says its response to Covid-19 was “prudent, well considered, and consistent with the response of other mine operators in the area.”
Diavik and De Beers’ nearby Gahcho Kué mine remain operational, but Dominion closed Ekati early in the pandemic on health and safety grounds.
Dominion and DDMI have each accused the other of operating irresponsibly during the pandemic. Dominion thinks Diavik should have ceased operations, while DDMI says Dominion made a mistake in suspending work at Ekati.
Hundreds of workers at Ekati were furloughed when that decision was made. Dominion says its parent group, the Washington Companies, will buy its assets and keep most employees with a view to reopening Ekati later this year.
DDMI, in its court filing, expressly rejected the contention that Dominion’s financial problems are related to DDMI’s actions.
“DDMI denies that it has contributed to Dominion’s liquidity crisis. Dominion’s liquidity crisis stems from the Washington Companies’ overly leveraged buyout and specifically Dominion’s inability, upon encountering economic headwinds, to meet the heavy debt obligations that the Washington Companies inflicted on it,” the filing states.
DDMI asks the court to dismiss Dominion’s action with costs.