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Court Orders Release of Dominion’s Diamonds

Diavik co-owner cannot hold back partner’s share of production as guarantee for missed payments, filing says.
May 11, 2020 7:38 AM   By Rapaport News
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RAPAPORT... A Canadian court has ordered the Rio Tinto subsidiary that manages the Diavik mine to release inventory belonging to Dominion Diamond Mines it had been holding as a guarantee for missed payments.

Diavik Diamond Mines (DDMI) has certain rights to extra shares in the mine if Dominion goes bankrupt with outstanding debts to the company, according to Dominion. However, DDMI cannot hold back Dominion’s share of production from April 1 to April 15, which DDMI still had in its possession, the court concluded. No ruling has been made yet on production from April 16 onward. 

“DDMI shall promptly deliver to [Dominion] their share of diamond production from the Diavik joint venture as required by, and in accordance with, the terms of the…agreement.” the court filings noted.

Dominion, which owns 40% of Diavik, entered insolvency protection last month. DDMI subsequently asked the court to force its partner to pay its share of the bills for operating the mine, claiming that the lack of financial input was putting the project at risk. The company also asked for permission to withhold Dominion’s share of rough at a joint sorting facility at Diavik until Dominion completed its payments.

Currently, all run-of-mine rough diamonds from Diavik enter a joint processing-and-splitting facility, where sorters group them by size and category. DDMI then delivers 40% of the goods to Dominion and keeps the rest for itself, reflecting the two parties’ share of ownership. Diamonds above 10.8 carats, as well as fancy-colored stones, do not form part of this split, and are shipped to Rio Tinto’s Antwerp sorting facility, with either Dominion or Rio Tinto buying them through an auction process.

Clarification: this story has been updated to reflect the ruling only affects Dominion’s share of production from April 1 to April 15.

Image: The Diavik mine. (Rio Tinto)
Tags: Court of Queen’s Bench of Alberta, DDMI, Diavik, diavik diamond mines, Diavik mine, Dominion, Dominion Diamond Mines, Insolvency, Rapaport News, Rio Tinto
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