Burgundy Weighs Sale of Ekati Mine as It Works to Stay Afloat

The Supreme Court of British Columbia has granted Burgundy Diamond Mines an extension on its creditor protection, as the miner considers the sale of its Ekati deposit in Canada.

The stay, which builds on the original filing earlier this month, gives Burgundy until July 28 either to restructure its business and pay back creditors, or find an alternative solution, the company said last week. The court also approved a sales and investment solicitation process — common in Canadian insolvency proceedings — for Burgundy subsidiary Arctic Canadian Diamond Company (ACDC), which runs Ekati.

“We recognize the importance of Ekati diamond mine to the Northwest Territories economy and to the many employees, contractors, businesses and communities that rely on the operation,” said Burgundy CEO Jeremy King. “We understand the concern the [creditor protection] process creates for stakeholders, and we remain focused on maintaining safe and responsible operations, while working toward a long-term solution for the business.”

The miner reported that its expenses far outweighed the financing it has received in recent months, especially during a prolonged downturn in the natural-diamond sector. It secured a loan of CAD 115 million ($84.9 million) from the Canadian government in December, and an additional CAD 60 million ($44 million) in March, as well as financial support from a shareholder, which it’s been using to keep the business running.

“Burgundy’s financial challenges…reflect significant external cost pressures impacting remote northern mining operations,” the company explained. “Ekati is a large-scale, remote, fly-in fly-out subarctic mining operation that depends heavily on diesel fuel for mining activities, power generation, heating, transportation and winter-road logistics.”

The recent war in Iran, which has disrupted global fuel markets, “materially increased diesel and freight costs during a critical operating period for the company,” the miner continued, adding that it had not anticipated the rise in fuel and related supply-chain costs when the loan was approved.

Image: The Ekati mine. (Burgundy Diamond Mines)