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Purchase of Dominion Diamond Mines' Ekati assets falls through, company says

The recall of workers comes as Dominion anticipates an agreement can be reached between company's banks that comprise its senior secured lenders and a group of holders of its second lien notes to restructure Dominion's debt and provide it with funding. NNSL File Photo

A bid to purchase Dominion Diamond Mine's Ekati-related assets won't proceed as planned due to an impasse in negotiations, the company said in a news release on Friday.

The deal fell through when Dominion's surety bond issuers Aviva Insurance Company of Canada, Argonaut Insurance Company and Zurich Insurance Company Ltd. couldn't reach an agreement with Canadian Diamond Holdings, L.P. and CA Canadian Diamond Mines ULC, affiliates of Dominion's parent the Washington Companies on the stalking horse bid for  Dominion's assets. That bid, said to worth $191 million was the only one put forward for the company's assets.

The issuers hold about $280 million in surety bonds currently posted with the GNWT, which provide security for the reclamation obligations of Dominion related to the Ekati mine.

Dominion determined that it was "impractical" to seek court approval for the bid, which is scheduled to be heard on Oct. 14  because no transaction could be completed due to the Washington Companies being unable to meet the surety condition.

Dominion will remain in creditor protection until Nov. 7, 2020, unless it is extended.

"Dominion is working with its advisors and will be consulting with stakeholders to determine next steps," the release said. "The Company will be assessing all strategic alternatives to return the Ekati Diamond Mine to full operations for the benefit of its employees, the NWT and other stakeholders."

Caroline Wawzonek, Minister of Finance and Minister of Industry, Tourism and Investment said in a comment on Friday that the GNWT is "very conscious" of the impact of the news from Dominion on those who might be affected.

"With that said, this morning’s announcement includes a commitment from Dominion to assess all strategic alternatives to return the Ekati Diamond Mine to full operations for the benefit of its employees, the NWT and other stakeholders, which we welcome.

"While it is unfortunate that The Washington Companies has withdrawn their current bid for the Ekati mine, the Companies’ Creditors Arrangement Act process will continue to play out through the courts. Although the prospective sale is ultimately a business matter between any bidder and Dominion, the GNWT is monitoring the process closely and will fulfill any role it may have including the continued protection of reclamation securities.

The company closed the Ekati mine in March due to concerns over the Covid-19 pandemic. It filed for insolvency about a month later.

The Washington Companies agreed to purchase Dominion’s assets in May. The sales process was approved by the Court of Queen’s Bench of Alberta on June 19.

Ekati is Canada’s first diamond mine and began operations in 1998. It lies about 310 km northeast of Yellowknife, near Lac de Gras.

Status of reopening Ekati mine

Dominion CEO Pat Merrin has previously expressed hope that Ekati could return to full operations by the fourth quarter of 2020.

NNSL Media has inquired with the company for further comment.

Wawzonek said that if Ekati doesn't reopen or if it's reopening is significantly delayed, it would "affect revenue and employment numbers in the territory."

"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. The government is currently moving forward on the final steps in the implementation of the Mineral Resources Act, which will provide certainty and transparency - allowing us to move forward together under a clear, jointly-developed regime."