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The Ekati diamond mine in Canada’s Northwest territories.

CANADIAN DIAMOND MINING SECTOR BREATHING EASIER, AS LONG BATTLE OVER EKATI’S FUTURE APPEARS RESOLVED

 

The long saga to decide the future of Ekati, Canada’s and longest-producing diamond mine appears to have drawn to an end, with the announcement by its owner, Dominion Diamond Mines that it has completed the sale of the facility and and associated assets to Arctic Canadian Diamond Company Ltd.

The plight of the mine was inexorably linked to the COVID crisis, and the difficulties encountered in the international diamond mining sector, which largely shut down all operations during the second and third quarters of 2020.

Dominion had ownership interests in two major producing diamond mines in Canada’s Northwest Territories – Ekati, in which it owns a controlling interest, and the Diavik mine, in which holds a 40 percent share.The deal with Arctic is limited to Ekati

Artic is a company formed and owned by funds and accounts managed by a group of U.S.-based and Canadian asset manager, including DDJ Capital Management, Brigade Capital Management, LP and Western Asset Management Company.

As a result of this deal, Arctic becomes one of the world’s larger diamond producers. It also has a controlling interest in Lac de Gras Diamond Project, which consists of 149,621 hectares located in in Canada’s Northwest Territories, close to Ekati. The area is to have significant exploration potential for the discovery of new diamondiferous kimberlites.

ARCTIC TAKES OVER EKATI’S ASSETS AND LIABILITIES

As part its agreement with Dominion, Arctic has acquired substantially all of Dominion’s assets, with the exception of the company’s interest in the Diavik joint venture agreement with the Anglo-Australian conglomerate, Rio Tinto.

It also has taken over also liabilities, in consideration for the assumption of various liabilities owing to Dominion’s creditors, employees, suppliers and surety bond holders. 

This includes assuming $70 million of Dominion’s outstanding indebtedness under its existing revolving credit agreement and the reclamation obligations of the Ekati mine.

For its part Arctic will receive a new $85 million fully funded working capital facility.

Above-surface mining at the Ekati diamond mine.

“This transaction significantly reduces our debt obligations, and provides sufficient liquidity to fund our operations, invest in future growth and allow the Company to emerge with a materially stronger balance sheet,” said Kristal Kaye, Arctic’s Chief Financial Officer.

Underground ground mining at the Ekati diamond mine.

RETURNING TO FULL OPERATION

In March 2020, Dominion had suspended operations at the Ekati mine to safeguard its employees and nearby communities from the threat of COVID-19. As a result, the Ekati mine was put on care and maintenance and a minimal crew remained at site to maintain the facility.

With the agreement it Arctic now complete, Ekati has returned to full operations and expects to recall all of its employees by February 25.

Meanwhile, Rory Moore, vice president of exploration at Dominion, has been appointed interim president the new operation.

“We are excited to have our employees back at work and to have Ekati in full production again,” said Moore. “We are also very grateful to our new owners for the commitment they have demonstrated to Ekati and its stakeholders. This new partnership will bring fresh perspectives to our operations and be the driving force behind our continued growth.”

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