Dominion Diamond blames pandemic for 'devastating impact': court filing
Calgary-based company says it's been hammered by restrictions, decreased demand
The owner of Canada's first diamond mine blamed transportation and business disruptions caused by measures to control the COVID-19 pandemic for its decision to seek court protection from creditors.
In an affidavit filed with the Alberta Court of Queen's Bench, Krystal Kaye, chief financial officer for Dominion Diamond Mines ULC, said the pandemic has had a "devastating impact" on the global diamond mining industry.
"Global diamond sales saw an almost immediate slowdown when the COVID-19 related lockdown began in China and the impact has become more acute as lockdown measures have been implemented in nearly all parts of the world in which Dominion operates," she said in the filing.
- For the latest on this story, here's a file on how the union for miners is reacting to Dominion seeking creditor protection
Travel and business lockdowns were felt most keenly in India, where most of the world's rough diamonds are sorted, cut and polished; in Antwerp, Belgium, where they're sold; and the United States, the top buyer of diamonds for retail sale, she added.
She said Dominion's high debt levels makes it impossible for the company to continue its business as usual.
Ownership stake in 2 northern mines
Calgary-based Dominion was granted creditor protection under the Companies' Creditors Arrangement Act on Wednesday and FTI Consulting was appointed monitor.
CCAA gives insolvent corporations protection from creditors while they restructure their business and financial affairs.
Dominion operates the Ekati diamond mine, Canada's first, in which it owns a controlling interest, and owns a 40 per cent stake in the Diavik diamond mine, both located in the Northwest Territories.
Dominion shut down the Ekati mine last month in an effort to protect its workers and local communities from the spread of COVID-19, but the Diavik mine, operated by a subsidiary of Rio Tinto PLC, is still open.
The Washington Companies, a private Montana-based company, bought Dominion for $1.2 billion US in 2017. The company did not immediately respond to a request for comment.
Dominion had revenue from diamond sales of about $528 million US in 2019, the affadavit says, but the shutdowns in India and Belgium have trapped diamond inventory from Ekati and Diavik with book value of about $180 million US.
It said Dominion is one of the two largest non-governmental employers in the Northwest Territories, with about 40 per cent of its 634 Canadian employees being northern residents and 60 per cent of those people being Indigenous people.
It said only 212 people are actively employed now with the temporary Ekati mine shutdown.