What do you do when you have $180 million in diamonds and can’t sell them?
That’s the problem facing Dominion Diamond Mines, according to an affidavit from Kristal Kaye, its chief financial officer. The company—which owns the Northwest Territories, Canada–based Ekati mine, as well as 40% of nearby Diavik—filed a petition for insolvency protection on Wednesday April 22.
Dominion is currently sitting on stones with a “book value” of $180 million, Kaye said. But with the Indian and Belgian markets closed—and India considering a month-long rough import ban—that big pile of gems is gathering dust. Of course, book value is not an absolute concept. Even when markets open up, “the prices which Dominion Belgium is able to achieve in its diamond sales may be below what has previously been anticipated, or may not be sufficiently economic to merit sales for some period of time,” Kaye admitted.
Plus, like so many businesses that have been put on hold, Dominion still has to pay its bills. On March 19, it put Ekati on care and maintenance, leading to a 400-person reduction in its workforce. But even care and maintenance incurs “material costs,” Kaye said.
Diavik, however, is still running. On Wednesday April 22, Dominion missed a regularly scheduled CAD 16 million payment to fund mine operations, breaching its agreement with joint-venture partner Rio Tinto.
Dominion also has a $20 million interest payment due May 1. It can’t make that, either, Kaye said.
Even though Dominion now faces a “liquidity crisis,” Kaye argued it still owns valuable assets—in 2019, a terrible year for the diamond business, it generated $528 million in sales and $151 million in EBITDA. Yet for all this, there’s a larger issue, which some think made this filing inevitable: Dominion has loads of debt.
