Dominion Asks for Breathing Room to Save Company

Dominion Diamond Mines, which filed for insolvency protection in April, has asked a Canadian bankruptcy court to allow it a little more time to save the company.

Dominion owns the Ekati diamond mine in Canada’s Northwest Territories (pictured), as well as 40% of the nearby Diavik mine.

In an Oct. 27 application before the Court of Queen’s Bench of Alberta, Dominion requested that Canada’s bankruptcy protections be extended for five more weeks while it sought a buyer or capital injection for the company.

Otherwise, “there is a real possibility that Dominion will not be able to avoid a liquidation,” the company said.

It added that the company believes its “business has value and is deserving of being restructured and saved.”

In an affidavit, board director Brendan Bell, Dominion’s former CEO, said the company was now talking with a new buyer about possibly acquiring Dominion, and was talking with first-lien lenders about a possible restructuring.

Ekati has been on care and maintenance since March, and reduced its workforce from 634 to 212, Bell said.

It’s also prepared a “liquidation analysis,” but Bell argued that if Dominion dissolved, it would hurt the local Northwest Territories communities as well as Dominion’s ability to fulfill certain impact benefit agreements and environmental reclamation obligations.

The application comes in the wake of a failed stalking horse bid from Washington Companies, the Montana-based mining giant that owned Dominion for a little over two years before the insolvency filing. That bid fell through when the company failed to reach an agreement with three surety bond insurers, whose approval was needed to approve the deal.

Last week, Rio Tinto, the senior partner in the Diavik mine, asked the court for permission to sell Dominion’s portion of Diavik’s diamond production, given Dominion’s inability to continue making the required “cash calls” that finance the mine. It said that Dominion’s insolvency was also putting Diavik at risk.

(Image courtesy of Diamond Diamond)

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JCK News Director