Dominion boss leaves, company says more Ekati layoffs possible

A diamond mined at the NWT's Ekati mine
A diamond mined at the NWT's Ekati mine. mnlamberson/Wikimedia

The interim boss of Dominion Diamond Mines has left his post, the company confirmed as the sale of its Ekati mine collapsed.

Financially troubled Dominion had hoped to sell its assets to another subsidiary of its parent, the Washington group, in a deal worth a little over $160 million. Instead, the deal fell apart on Friday.

Three insurance companies with veto power over the deal rejected it, Dominion said in a news release.

The long-term consequences for the Ekati mine aren’t yet clear.



Dominion’s interim chief executive, Pat Merrin, has left the company and has not been replaced, the company confirmed to Cabin Radio. He was appointed by Dominion in February.

Merrin remains the chief operating officer of the Washington group.

Unusually, he served as both chief executive of Ekati seller Dominion and a leading executive at Washington, the group behind its likely buyer.

With Friday’s announcement that the sale would not go ahead, a Dominion spokesperson told Cabin Radio by email: “In light of this development, Pat has advised that it would be appropriate that he step down as interim CEO.”



The spokesperson said Dominion chief financial officer Kristal Kaye and chief operating officer Mike Welch “will lead Dominion through this challenging period, with strong support from the rest of the management team and our independent chairman Brendan Bell.”

What now for employees?

Hundreds of furloughed employees were told “nothing changes for now” in a question-and-answer document distributed to staff on Friday.

For the first time, the mine’s managers formally contemplated the possibility of job losses. Until now, Dominion had insisted almost all staff would keep their jobs as it worked toward a sale. (Around a dozen people were recently let go despite that public optimism.)

“Unfortunately, the uncertainty caused by this development will force us to conserve cash as much as possible in the near term,” Dominion’s document stated.

“This could mean extending furloughs or making permanent layoffs. As decisions are made, we will be direct and transparent with employees and the union.”

The Union of Northern Workers is expected to comment next week, following the Thanksgiving holiday.

Will the mine ever reopen?

Ekati has been in care-and-maintenance mode since the Covid-19 pandemic reached the Northwest Territories in the spring. It was the only one of the territory’s three active diamond mines to close.

At a Friday afternoon meeting, the skeleton crew at the mine site was told Dominion will keep Ekati in care and maintenance for the foreseeable future.



“The entire management team is working tirelessly to assess all strategic alternatives to return the mine to full operations,” staff have been told.

Some staff recently recalled from furlough were told managers have had too little time to figure out whether those employees should still report for duty or not.

“Management was just informed of this issue and needs time to analyze a longer-term care and maintenance period and the resources associated with that,” the document sent to staff read.

“Please be assured that as this process continues to unfold in the coming days and weeks, we will inform you as soon as decisions are made.”

The territorial government, which is watching Dominion’s travails with a wary eye on an economy already battered this year, said on Friday it was “monitoring the process closely.”

In an emailed statement, finance and industry minister Caroline Wawzonek stressed the NWT would protect its reclamation securities. Those securities are vast chunks of money placed in the GNWT’s care by Dominion as a guarantee the company will some day adequately clean up Ekati.

“If the Ekati mine is ultimately unable to reopen or significantly delayed, this will affect revenue and employment numbers in the territory. Overall prospects for the NWT’s economic future have not changed substantially,” Wawzonek said.

“The GNWT recognizes the significant importance of the mining sector to the territory. We remain committed to promoting the NWT as an attractive place to do business and fostering an environment that is conducive to responsible exploration and resource extraction.



“Our main concern remains the residents and businesses of the NWT and we will continue to advocate for them tirelessly.”

Is another buyer out there?

Buyers willing to spend a nine-figure sum on a faltering subarctic diamond mine in the middle of a global pandemic are not in plentiful supply.

However, there may be at least one other party prepared to bid now Washington has pulled out.

A group of Dominion’s creditors had already been trying to put a bid together, but ran out of time under the existing court-approved sale process that subsequently collapsed this week.

Those creditors had suggested obstacles were placed in their path that made submitting an appropriate bid impossible before the September deadline.

In court documents, they implied the process had by design favoured the subsidiary of Dominion’s parent, Washington. The creditors’ bid had to meet conditions that were not applied to the Washington subsidiary’s bid, the creditors argued.

Now, with Washington declared to be suddenly and fully out of the picture, the creditors may renew their interest.

They had already been preparing to argue two points in court: that Ekati’s sale to the Washington subsidiary did not deserve approval, and enough time existed for a better deal to be negotiated.



But time remains of the essence.

In the short term, what happens?

In a matter of weeks, Dominion chairman Bell has already told the court, the mine needs to have its 2021 ice road season fully mapped out.

Without hiring truck drivers or buying enough fuel and goods (Dominion has made a start), it won’t be possible to resupply Ekati to the extent required to viably reopen it in the next year, Bell argued.

At the time, he was trying to convince an Alberta court to approve Ekati’s sale to Washington’s subsidiary. The group of creditors had intended to oppose it.

The court will no longer have to make that decision, but it does need to decide whether to extend Dominion’s creditor protection.

For the past half a year, Dominion has enjoyed a form of court protection that lets it restructure its finances and try to find a buyer without being forced to pay off debts that would otherwise bankrupt the company.

That is due to expire on November 7. The company says it is confident the court will grant an extension, presumably with the intention of allowing Dominion to either negotiate with the group of creditors or restart the whole process and search for fresh bidders.

The court had been due to consider the case on October 14. It’s not clear if that date will be kept in light of Friday’s developments.