Rio Tinto now sole owner of Diavik Mine
Acquires Dominion's interest in iconic NWT diamond operation North of 60 Mining News – November 19, 2021
Last updated 12/2/2021 at 2:10pm
In a deal that bolsters certainty for the future of the Diavik Mine and Northwest Territories' economy, Rio Tinto has acquired full ownership of this iconic diamond operation in Canada's Arctic.
Rio Tinto's 40% partner in Diavik, Dominion Diamond Mines, filed for insolvency protection under the Canadian Companies' Creditors Arrangement Act at the height of the COVID pandemic in 2020.
"The CCAA filing was necessitated primarily by the impact of the COVID-19 pandemic," Dominion Diamond Mines penned in an April 2020 statement. "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."
The bankruptcy of one of the Diavik Mine owners added further uncertainty for Northwest Territories, which was already reeling from the financial blow to an economy driven largely by its diamond mining sector.
Rio Tinto, which had previously indicated that it was not interested in acquiring Dominion's 40% stake in Diavik, has decided to move ahead with a deal that gives it sole ownership of the diamond mine.
It is estimated that the value of production from the three diamond mines in Northwest Territories – Diavik, Ekati, and Gahcho Kué – dropped roughly 45% from US$1.7 billion in 2019 to approximately US$929 million last year.
The 6.2 million carats of diamonds produced at Diavik during 2020 accounted for approximately 47% of the total diamonds produced in the territory last year.
Under the terms of the transaction, Rio Tinto has invested an undisclosed amount to acquire all Diavik assets held by Dominion, including unsold Diavik production and cash collateral held as security for Diavik's future closure costs. In return, Rio Tinto has released Dominion and its lenders from all outstanding liabilities and obligations to fund the operations or closure of the joint venture.
"Diavik will now move forward with certainty to continue supplying customers with high quality, responsibly sourced Canadian diamonds and making a significant contribution to the Northwest Territories of Canada and local communities," Rio Tinto Minerals Chief Executive Sinead Kaufman.
Rio Tinto says the high-end, predominantly white gem-quality diamonds with Canadian provenance produced at Diavik continue to be in strong demand in all established and emerging consumer markets.
This is good news for Northwest Territories and the 1,100 workers at Diavik, of which 17% are Northern Indigenous people.
Under the current mine plan, production at Diavik is expected to end in 2025.
"As owner and operator, Rio Tinto is committed to delivering Diavik's eventual closure safely and responsibly, to leave a positive legacy in consultation with our community and government partners," said Kaufman.