RAPAPORT… A subsidiary of Rio Tinto has voiced concern over the continuity of the Diavik mine after its joint-venture partner in the project was granted protection from creditors.
The insolvency order obtained in late April by Dominion Diamond Mines threatens the future of the Diavik deposit as it exempts the 40% shareholder from paying for its upkeep, according to a court filing by Diavik Diamond Mines (DDMI), a subsidiary of Rio Tinto.
DDMI, which owns 60% of the asset and manages the project, would be required to cover any shortfall to keep operations moving, it noted.
A failure by Dominion to make the required payments “places the assets of the joint venture and the operation of the Diavik mine at risk,” DDMI said in the April 30 filing with the Court of Queen’s Bench of Alberta.
Dominion had already asked for a payment deferral from April 15 to April 22, to which DDMI agreed. However, at an April 20 meeting between the two parties, Dominion did not inform DDMI of its intention to file for insolvency protection on April 22. On the day the court granted its initial request, Dominion also defaulted on a payment of CAD 16 million ($11.5 million) to the joint venture, the filing stated.
In its initial court filing, Dominion also failed to account for approximately CAD 56.3 million ($39.9 million) in upcoming payments it owed to DDMI, according to the papers. DDMI stressed it would cover Dominion’s costs temporarily, but added it would keep a portion of Dominion’s 40% share of Diavik diamonds until Dominion could repay its debt.
DDMI argued the move would not further hurt Dominion since the miner previously stated it was unable to sell any diamonds in the current market, and could not ship them from Canada. However, DDMI noted that it had been able to get diamonds to Belgium and sell them during the pandemic.
Last month, Dominion filed for insolvency protection through May 2, before filing for an extension until June 1 last week.
Image: An aerial view of the Diavik mine. (Dominion Diamond Mines)
Dominion Insolvency ‘Puts Diavik Mine at Risk’
The Bottom Line
- Dominion Diamond Mines, holding a 40% stake in the Diavik mine, filed for insolvency protection, defaulting on a CAD 16 million payment to the joint venture.
- Rio Tinto’s subsidiary, Diavik Diamond Mines (DDMI), which owns 60% and manages the mine, must cover Dominion’s share of upkeep costs to maintain operations.
- DDMI plans to withhold a portion of Dominion’s diamond share until debts are repaid, noting Dominion’s inability to sell or ship diamonds amid current market conditions.
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