Dominion Diamond Mines says it has finalized the sale of the Ekati diamond mine in the Northwest Territories to the Arctic Canadian Diamond Company.
In a press release on Wednesday night, Dominion said Arctic – a company formed and owned by various assest management companies – had acquired “substantially all” of its assets, including $70 million US of Dominion’s outstanding debt. Dominion’s 40 percent share of the neighbouring Diavik mine is excluded from the sale.
According to the release, Arctic will also receive an $85 million US working capital fund for operations at the Ekati mine as part of the sale.
“This transaction significantly reduces our debt obligations, and provides sufficient liquidity to fund our operations, invest in future growth and allow the company to emerge with a materially stronger balance sheet,” stated Dominion’s chief financial officer Kristal Kaye.
The territorial government was involved in the sale of Ekati, as Arctic also takes over Dominion’s responsibility for environmental management and reclamation of the mine, along with financial security the government holds if the company fails to meet those obligations.
In the NWT Legislative Assembly on Wednesday, Frame Lake MLA Kevin O’Reilly questioned if the government had protected the public’s interest when reviewing the sale.
He questioned why the mine’s financial security is still being held in a “new and untested” form of security called a surety bond, which is backed by insurance companies, rather than irrevocable letters of credit issued by banks.
Shane Thompson, NWT’s minister of Environment and Natural Resources said with the money required to purchase Ekati it would have been a “detriment” to require Arctic to replace the surety bonds with irrevocable letters of credit. However, he noted there is an agreement for Arctic to replace the sureties with cash over time.
“Sureties are an acceptable form of security and our due diligence on the Ekati sale included an assessment of the financial health of the surety providers,” Thompson said.
O’Reilly said despite repeated requests to the territorial government, he has never gotten a consolidated list of Dominion’s outstanding debts to the NWT, which he estimates are over $15 million.
“I was given partial lists, told that some of the amounts such as royalties or taxes could not be disclosed to me as a regular MLA, even in confidence, or that amounts were still being determined,” he said, describing Cabinet’s view of regular MLAs as “country bumpkins.”
“That’s not a good reflection on our consensus government conventions or publicly stated commitments to openness and transparency.”
NWT Finance Minister Caroline Wawzonek said that none of the outstanding payments to the territorial government would be forgiven. She added that the government did provide those figures, but royalties and deals between private companies are not made public.
The Ekati mine has been shut down since early March as a result of the Covid-19 pandemic. Last month, production resumed at the mine in anticipation of the sale, as workers were recalled in a phased approach.
“We are excited to have our employees back at work and to have Ekati in full production again,” stated Dominion interim president Rory Moore.
“This new partnership will bring fresh perspectives to our operations and be the driving force behind our growth.”
Dominion initially announced the sale of Ekati to a group of creditors in early December.
The sale follows Dominion’s plans to sell Ekati’s assets to another subsidiary of its parent company, the Washington Group, which fell through in October when insurance companies exercised their veto rights.