Dominion Diamonds says Ekati’s proposed sale is off

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The owner of the Ekati diamond mine in the Northwest Territories has said the proposed $ 166 million sale of the mine to affiliates of Washington companies is turned off.In a press release on Friday, Dominion Diamonds said it had ended negotiations over plans to sell certain Dominion assets, including the Ekati mine.

In the press release, Dominion said it was told that the users of the bond and the buyer were at a “negotiating stalemate” with no reasonable chance of reaching an agreement satisfactory to all parties before the agreement was reached. be submitted to the courts for approval. October 14.

At the heart of the termination of the proposed sale is the $ 280 million bond posted with the Government of the Northwest Territories. The money is a guarantee against possible reclamation expenses at the Ekati mine site. Surety bonds are a promise to pay a financial obligation on behalf of another person or company, if that party does not meet their financial obligations.

In the press release, Dominion said potential buyers have been unable to secure a deal with three insurance companies that post mine reclamation guarantees.

Longtime mining industry observer Kevin O’Reilly said the collapse of the proposed security deal was concerning, and said he was concerned the government would accept surety bonds from insurance companies as collateral.

“It raises questions about what’s going on and whether these bonds are as secure as people think,” he said.

O’Reilly said the government previously only accepted irrevocable letters of credit as collateral. He said these are much easier to cash and transfer than bonds.

There are also concerns about the company’s share in the safety of the Diavik mine, of which Dominon owns 40%. An affidavit filed in the creditors protection case shows Dominion owes more than $ 41 million for its share of the collateral for this mine.

Plan to restart even later

Dominion Diamond Mines ULC Said It Last Month planned to return the project suspended from its full operational status after accepting a “stalking offer” by an affiliate buyer to enable it to exit the courts from creditor protection.

Dominion Diamond Mines ULC stated at the time that the offer submitted by Canadian Diamond Holdings, LP and CA Canadian Diamond Mines ULC, affiliated with the Washington companies, was the only qualified offer made in an approved sale process. by the Court of Queen’s Bench of Alberta.

The offer to purchase was the only offer received for Dominion’s assets.

The offer for approximately US $ 126 million (C $ 166 million) in cash provided for the purchase of substantially all of Dominion’s assets related to Ekati and the assumption of operating liabilities related to Ekati. which includes the offer of employment to Dominion employees and the assumption of pension obligations. .

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