Dominion Fights Rio Tinto Diamond Sale

RAPAPORT… Dominion Diamond Mines has asked a Canadian court to prevent Rio Tinto from selling its portion of rough diamonds from the Diavik joint venture, calling the sale unfair and unreasonable.

Rio Tinto-owned Diavik Diamond Mines, Inc.’s (DDMI) proposed sales plan would not assure maximum value from the rough, given it sells via long-term contracts, which generally offer buyers discounts, Dominion noted. Dominion holds tenders, which could result in up to 5% more for the same stones, the company argued.

“The DDMI sale proposal is a process that effectively gives DDMI free rein to sell Dominion’s assets in any manner DDMI wishes, and without any significant details as to the process DDMI will utilize to sell diamonds,” Dominion said.

Additionally, DDMI requested to sell the goods because it believed Dominion would miss future payments after its sale of the Ekati mine fell through, Dominion claimed.

“DDMI is asking for security for the cover payments months in advance without any reliable evidence that it is (or will be) under-secured for those cover payments,” the filing stated.

In fact, DDMI is holding a larger share of Dominion’s diamonds than it legally should, Dominion argued. The court ruled on May 8 that DDMI was required to return to Dominion a portion of the diamonds it was keeping as collateral. However, DDMI has only given back the smaller stones, and has withheld 7,275 carats of larger stones, Dominion said.

“DDMI’s request for this court to revisit this issue is simply an attempt by DDMI — once again — to ask for more concessions and more protections than it has already been granted by Dominion and this court,” Dominion noted.

Last week, Rio Tinto petitioned the court to allow it to sell Dominion’s share of rough diamonds from Diavik, which it had been holding as collateral, in order to recoup more than CAD $120 million ($91.4 million) in unpaid debt required to run the mine. Dominion missed those payments, which are required as part of the joint-venture agreement, after filing for insolvency protection in April. 

Image: Rough diamonds. (Dominion Diamond Mines)