COVID-19 shutters Ekati, owner insolvent
Dominion evaluates alternatives to re-open diamond mine
Last updated 4/23/2020 at 1:10pm
Northwest Territories' mining sector took a major blow with the news that Dominion Diamond Mines, majority owner of the Ekati diamond mine and 40% owner of the Diavik diamond mine has filed for insolvency protection under the Companies' Creditors Arrangement Act (CCAA).
While it has been a tough year for diamond markets, the COVID-19 pandemic was the blow that has forced Dominion to file for creditor protection.
"The CCAA filing was necessitated primarily by the impact of the COVID-19 pandemic, Dominion Diamond Mines penned in an April 22 press release. "Although the company has strong diamond inventory, sorting houses and diamond markets are closed. These are key channels to facilitate the sale of the company's inventory, so currently there is no ability to generate sufficient revenue to support Dominion's ongoing financial obligations."
In mid-March, the company announced it was suspending operations at Ekati in order to safeguard the health of mine employees and nearby communities.
"Although none of Dominion's employees have tested positive for the coronavirus to date, this preventative action was determined to be a necessary step given the rapid spread of the virus, the remote location of the Ekati mine's operations and the high frequency of air travel required for employees and support staff to access mining operations," the company inked in a March 19 statement.
The Ekati and Diavik mines accounted for C$1.7 billion, or roughly 35%, of Northwest Territories total gross domestic product during 2018. So, the closure of one of these operations is a major blow to the territory's economy.
The world-renowned diamond mine was wound down to care and maintenance and a limited crew is keeping the facilities ready in the event that a decision is made to re-establish operations at the mine.
"As the spread of COVID-19 subsides and diamond markets reopen, Dominion plans to resume mining operations at the Ekati diamond mine and safely recall its furloughed workers," the company said on April 22.
In the meantime, "Dominion intends to use the CCAA process to engage in discussions with its lenders, creditors, equity owner and other stakeholders and to solicit and evaluate strategic alternatives to restructure the company financially and operationally, and position it for long-term success when global economic and industry conditions improve."