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Dominion to Sell Assets in Bid to Avoid Bankruptcy

Miner has signed letter of intent with an affiliate of The Washington Companies.
May 24, 2020 8:40 AM   By Rapaport News
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RAPAPORT... Dominion Diamond Mines has agreed to an asset sale that would allow it to resume mining operations and avoid bankruptcy.

The deal, which is subject to court approval, would provide an affiliate of the Washington Companies — which purchased Dominion for $1.2 billion in 2017 — with the right to acquire all of Dominion’s assets for approximately $126 million. The affiliate would also assume all of Dominion’s liabilities, the miner said Friday.

In addition, Washington will give Dominion up to $60 million in short-term financing to restart operations at its Ekati mine in Canada, pay employees and suppliers, and provide liquidity until the sale is closed.

However, that deal is not a final offer. If the court approves, it will hold a supervised bidding process designed to achieve the highest or best offer for purchase of or investment in Dominion. Washington’s deal will serve as the “stalking horse” bid for Dominion, meaning it sets a bottom floor that any future bids must beat, Dominion noted. The deal with Washington would be subject to termination if a higher offer were made.

The proposed purchase must meet certain conditions to gain court approval, Dominion stressed. While the miner fully owns the Ekati deposit, it has a 40% stake in the Diavik site, with the remainder owned by Rio Tinto. Dominion must reach a separate agreement with Rio Tinto regarding Diavik under terms that are acceptable to Washington. If the parties cannot reach a deal that is agreeable to all, the sale will move forward with only Dominon’s Ekati mine, the Lac de Gras diamond-exploration project, and the company’s inventory and other assets, but would not include Dominion’s share in, or liabilities to, Diavik.

The court had previously allowed Diavik Diamond Mines (DDMI), the Rio Tinto subsidiary that manages the Diavik mine, to hold a portion of Dominion’s rough from the deposit as a guarantee for a missed payment to the joint venture. It is not clear who will take possession of those diamonds should Rio Tinto not agree to Dominion’s terms.

Dominion filed for insolvency protection in Canada’s Alberta Court of Queen’s Bench on April 22, stating it was having difficulty paying bills and maintaining operations amid the coronavirus pandemic.

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