Diavik’s continued operation now ‘at risk’ over missing $120M

The future of the NWT’s Diavik mine is now “at risk,” managers say, with Diavik operator DDMI owed $120 million by financially stricken minority owner Dominion.

Dominion owns 40 percent of Diavik but hasn’t been making monthly payments to help fund the mine’s operations since it entered creditor protection more than half a year ago.

DDMI, which owns the other 60 percent of the mine, says its parent company Rio Tinto is refusing to provide more cash unless DDMI can demonstrate it will get back the $120 million Dominion owes.


As a result, DDMI is asking a court to let it sell off the share of Diavik diamonds that would previously have been handed to Dominion – then keep the proceeds as a way of getting back the money owed.

The court had already granted DDMI the ability to store those diamonds, as a form of collateral, while Dominion went through creditor protection.

DDMI says now is the time to start selling them, as nobody has come forward to bid on Dominion’s 40-percent share of Diavik and there is “no reasonable prospect” of Dominion finding the money any other way.

Dominion, meanwhile, just saw the sale of its Ekati mine collapse after three insurance companies objected to the deal’s terms.

DDMI’s court filings this week suggest the futures of Ekati and Diavik, two of the NWT’s three active diamond mines, are now both imperilled by Dominion’s financial troubles.


Dominion started the year already facing a bleak financial outlook. The company decided to shut down Ekati as Covid-19 reached the NWT and subsequently said the pandemic had halted its ability to sell diamonds, making the situation even worse.

‘Fragile’ demand for diamonds

What happens next to Ekati and Diavik appears to rest on Dominion and DDMI figuring out logistics for the coming winter road season and, more importantly, how to pay for it.

Dominion has tentatively ordered some fuel for the ice road season but has no means of making any significant financial commitments without a buyer in place for Ekati.

In an affidavit, DDMI finance manager Thomas Croese suggested Diavik was in much the same place without Dominion’s $120 million in payments.


“Significant expenditures are required for the acquisition of critical materials and supplies to be transported to site on the winter road and will have to be incurred very shortly,” Croese wrote.

“DDMI does not have sufficient capital … without receiving advances from its parent, Rio Tinto. Rio Tinto will not provide funding without assurances that DDMI will be able to recover [Dominion’s] indebtedness.

“The Diavik mine’s continued operation is at risk in the present circumstances.”

Together, the mines are directly responsible for around 1,000 NWT jobs and indirectly fund many more through payments to contractors and nearby communities. Dominion has already permanently laid off some staff and warned more job losses could follow.

On October 30, an Alberta court will be asked to give DDMI permission to begin selling off Dominion’s share of diamonds from Diavik.

Even so, Croese says it’s by no means clear that the market will allow DDMI to claw back the full $120 million.

“While market conditions and demand have improved somewhat in recent weeks, the outlook remains highly unsure and volatile,” he wrote.

“Retail demand for diamond jewellery in the United States continues to be fragile, Covid-19 is still growing at an alarming rate in India [where many diamond processing facilities are based] with potential impacts on future factory capacity, and overall liquidity and logistics are expected to remain affected in the period ahead.

“In addition, the excess inventory at rough producers is at very high levels which increases risks on future volatility and prices.

“In this context, it remains extremely difficult to forecast prices with any degree of confidence.”

Diavik and the NWT’s third diamond mine, Gahcho Kué – run by De Beers – remain operational.

Dominion has yet to have a responding brief published to the website of FTI, the court-appointed monitor overseeing legal proceedings related to Dominion’s financial difficulties.