Dominion explores federal help with liquidation ‘a real possibility’
Dominion Diamond Mines could pursue a form of federal bailout after the sale of its Ekati mine collapsed this month.
Brendan Bell, a director of the company, said Dominion had spoken with a Crown corporation – among others – as it tried to avoid liquidation, which Bell said was now “a real possibility.”
Creditor protection allows a financially troubled company to pause repayment of many debts and other obligations while it restructures or seeks a buyer.
Dominion has spent most of the year in creditor protection. With the demise of an earlier deal to sell Ekati to another subsidiary of its parent company, Washington, the company says it needs more time to work out a way forward.
That deal fell through because three insurance companies with veto power over the sale rejected it.
Bell said those insurance companies may yet step in to provide some form of financial assistance.
A separate group of creditors that came close to bidding for Dominion’s assets a month ago is also preparing a new offer, according to Bell’s affidavit.
That group “has advised that it is working toward a going-concern solution and a restructuring transaction,” Bell wrote, without going into detail.
Bell said the group of creditors had offered up to US $50 million to help fund restarting the Ekati mine.
He went on to state: “Dominion has engaged with representatives of a federal financial Crown corporation regarding available options for support for Dominion.”
The nature of those options was not clear. Dominion did not immediately respond to a request for clarification.
Dominion ‘deserves to be saved’
With the company seeking continued court protection, Bell’s affidavit portrayed Dominion – or at least the Ekati mine – as a venture too big to fail.
He took pains in the document to note the socio-economic agreement and impact benefit agreements that have seen money flow from the mine to northern, Indigenous communities.
For example, Bell reiterated the $524 million Dominion spent in the North over the course of 2018 and 2019.
“I am of the view that Dominion’s business has value, is deserving of being restructured and saved, and that a liquidation of the assets would not serve stakeholder interests,” he wrote.
“Absent a purchaser for Dominion’s assets or an investor prepared to make an equity injection in the near term, there is a real possibility that Dominion will not be able to avoid liquidation.”
There was no suggestion that the territorial government had been approached to offer financial support. The GNWT had, however, “been briefed,” Bell wrote.
Dominion owns and operates the Ekati diamond mine, which has been in care-and-maintenance mode since the Covid-19 pandemic’s onset in March, and owns a 40-percent stake in the neighbouring Diavik mine, which remained open.
DDMI, owner of the other 60 percent of Diavik, is in the process of asking a court to grant it the ability to sell Dominion’s share of the diamonds from Diavik to cover money Dominion owes DDMI.
Bell said Ekati ordinarily employs 634 people but only 212 are actively working. Around 400 staff have spent months being furloughed while the mine remains shut down, some have been laid off permanently, and Dominion has said other jobs may soon be cut.
Of those 634 workers, 403 are unionized. All but 84 of those are not currently working. Of the 231 non-unionized staff, 128 are actively employed.
In a positive development for the mine, Dominion said it had now sold US $70 million in diamonds after being unable to do so for much of the year. That revenue has been used to pay off money borrowed to keep operations going, Bell wrote.
Creditor protection is expected to ultimately result in one of four outcomes.
Bell said Dominion was considering either scaling back its care-and-maintenance spend for the foreseeable future, restarting operations in 2021, further restructuring (for example through a sale), or liquidating.
Chamber creates petition
The prospect of one of the NWT’s three active diamond mines liquidating was enough for the territory’s chamber of mines to launch a petition this week.
“The Ekati diamond mine is a huge part of why mining is the largest contributor to the NWT economy. Its closure this year has created significant hardship for employees, businesses, and governments,” the chamber wrote in an email to members.
“The mine has potential to reopen, but we fear it will not if a decision is made to liquidate the assets.”
The chamber’s petition also appeared to contemplate some form of government rescue for the mine.
“Ekati’s fate is now before the court. Collectively, we can ask the court and governments to help ensure the mine’s future,” the chamber’s message concluded.
An Alberta court will on Friday consider Dominion’s request for another month of creditor protection – and DDMI’s request to begin selling Dominion’s share of Diavik diamonds.