(NWT’s Ekati diamond mine shut down production on March 20. Supplied photo)
The future of the Northwest Territories’ largest private industry is looking grim.
Dominion Diamond Mines, owner of Ekati mine, roughly 300 km northwest of Yellowknife and a 40 per cent partner in neighbouring mine Diavik, has filed for creditor protection.
According to a news release from April 22, Alberta Court of Queen’s Bench granted protection for Dominion under the Companies’ Creditors Arrangement Act.
The company tied its immediate financial woes to the COVID-19 pandemic.
“Although the company has strong diamond inventory, sorting houses and diamond markets are closed,”the release said.
“These are key channels to facilitate the sale of the company’s inventory, so currently there is no ability to generate sufficient revenue to support Dominion’s ongoing financial obligations.”
A shock
The news came as a shock to Todd Parsons, president of the Union of Northern Workers (UNW), who said the union had been in contact with the employer a number of times regarding the company scaling back the Ekati site to just care and maintenance in March.
“We were quite surprised to receive notification that Dominion Diamonds had filed for insolvency protection in the Alberta courts,” Parsons said in a telephone interview.
“We were not aware that there were concerns around cash flow for the property.”
Ekati has been in production since 1998 and has 400 employees with UNW.
Parsons said the union’s legal team is reviewing the court documents to ensure member benefits can be relied on as the company restructures.
“We do and we will ask the employer to make it a priority to deal with the workers and treat them as a priority,” he added.
More than 1,000 jobs are tied to the mine’s fate.
From the North
In 2018, 44 per cent of Ekati’s workers were from the North and 25 per cent were Indigenous.
The company said it could lose another $39 million between April and July.
“Our community in the North relies heavily on the mining industry, and we are well aware there are struggles in the industry aside from the COVID-19 pandemic,” Parsons said.
According to a 2018 government report, since 1996 diamond mines have spent approximately 70 per cent of their total procurement – close to $14.5 billion – with northern businesses.
Mark Brajer, chief executive officer of Tlicho Investment Corporation, said he was also surprised by the press release and is concerned for the businesses that service the mines.
“I have been trying to go through the documentation because we do have some touch points with all of the mines,” Brajer told APTN over the phone.
Dominion will be back in virtual court May 2 in hopes of cementing an extension of its creditor protection.
June 1
According to a notice of application, Dominion is vying for an extension until at least June 1.
Brajer said time is of the essence for the territorial government to diversify the resource sector.
“I’m not looking bleakly and saying, ‘Oh my God, in five years there’s nothing yet.’ I try to look at how do we move forward,” he said.
“There’s billions of dollars of remediation work in the North. Now, that doesn’t have as high employment rate as a mine, (but) there is that potential.”
Creditor protection will buy a little time for Dominion to either restructure, find a different investor, or sell to a new buyer while given a grace period to temporarily avoid repaying creditors.
NWT-MP Michael McLeod has been in discussion with territorial leaders to potentially set up a working group to explore what support the federal government can offer, including financial relief.
“There are many variables here and issues that come to play. We need to recognize there was a downturn in the market. The downturn is not only caused by COVID-19. The market is currently weak and experiencing a downturn in prices,” McLeod said in a telephone interview.
Northern economy
McLeod suggested big infrastructure projects in line with goals set in Canada’s Arctic Policy are one method of restarting the northern economy.
“We have to look at what projects are ready to go,” he said.
“Maybe we should be looking at telecommunications, the expansion of communications, and other areas to invest in – maybe green infrastructure, deferred maintenance.”
Dominion declined an interview with APTN News, but has announced plans to reopen Ekati’s operations once the pandemic is over.
