The stalking-horse bid for the Dominion Diamond Mines has fallen apart, raising doubt about the future of Ekati, the pioneering Canadian mine that it owns.
An affiliate of Washington Companies, which owned Dominion before its April filing for insolvency protection, submitted the $126 million stalking-horse bid in May. Dominion had hoped to win court approval for Washington’s bid at a court hearing at the Queen’s Bench of Alberta on Wednesday.
However, Friday, Dominion issued a press release stating that the bid had failed to win the approval of three insurance companies who had issued C$280 million in surety bonds for the mine. Their approval was necessary for the deal to go through.
According to a statement, Dominion and the bond issuers “have reached an impasse in negotiations, and there is no reasonable prospect of reaching a satisfactory agreement among them.”
All of which leaves the future of Ekati, the first mine in Canada’s Northwest Territories, very much in doubt. In its release, Dominion said it has received “no other qualified bids” or investor interest in the 22-year-old diamond mine, and it is currently to exploring “all strategic alternatives to return [it] to full operations.”
In a report after the bid fell apart, Cabin Radio suggested that “a group of Dominion’s creditors” may be willing to make a bid, but complained that, up until now, the process favored the bid offered by Washington.
A recent CBC report suggested that, because of a provision in the COVID-19 stimulus bill, Washington stood to get a massive tax break when it repurchased Dominion.
Dominion also owns 40% of the nearby Diavik diamond mine, with Rio Tinto controlling the other 60%. It’s also unclear what will happen to that holding if Dominion doesn’t find a purchaser. Rio Tinto, which is currently in litigation with Dominion, previously stated that it is uninterested in buying out Dominion’s minority stake.
Ekati has been on care and maintenance since March, when Dominion temporarily shut it down, citing the strains of COVID-19. Last week, it laid off an unspecified number of employees, reportedly without severance.
Dominion’s current chief executive, Patrick Merrin, who was appointed in February, has also stepped down, according to Cabin Radio. He’s being replaced by chief financial officer Kristal Kaye and chief operating officer Mike Welch, it said.
Dominion Diamond representatives did not return a request for comment by the time of publication.
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