Rio Tinto now the sole owner of Diavik diamond mine
Cecilia Jamasmie | November 18, 2021
Aerial view of Diavik diamond mine. (Image courtesy of Dominion Diamond.)
Rio Tinto (ASX, LON, NYSE: RIO) became on Thursday the sole owner of the iconic Diavik diamond mine in Canada’s Northwest Territories after buying the 40% share held by Dominion Diamond Mines, despite previously saying it had no plans to take full control of the aging Arctic mine.
The deal gives Rio Tinto all remaining Diavik assets held by Dominion, including unsold production and cash collateral held as security for the mine’s future closure costs. In return, the world’s second largest miner has released Dominion and its lenders from all outstanding liabilities and obligations to fund the operations or closure of the joint venture.
The transaction comes after a 19-month process triggered in April 2020 by Dominion Diamond Mines filing for insolvency protection under the Canadian Companies’ Creditors Arrangement Act.
Dominion, which was purchased by The Washington Companies in 2017 for $1.2 billion, was once the world’s fourth largest diamond producer. Its financial troubles — which played out in court over several months last year — ultimately led it to sell in December 2020 its other Canadian mine, Ekati.
“Diavik will now move forward with certainty to continue supplying customers with high quality, responsibly sourced Canadian diamonds,” Rio Tinto Minerals boss Sinead Kaufman said in the statement.
Diavik, which faces closure by 2025 and will cost hundreds of millions of dollars to clean up, has been in production since 2003 and is Canada’s largest diamond mine. It yielded 6.2 million carats of rough diamonds in 2020.
Sector “fully recovered”
The diamond market came to a standstill at the height of the covid-19 pandemic, increasing worries that oversupply could hurt the sector for years. But surging purchases by intermediaries who cut, polish and trade stones has all but wiped-out miners’ stockpiles, even as Alrosa (MCX: ALRS) — the world’s top diamond miner by output — and its closest competitor, Anglo American’s De Beers, have hiked prices.
Alrosa said in October it believed the industry had “fully recovered” from the effects of the the global pandemic, with sales of both roughs and diamond jewellery up this year about 23% compared to 2020 levels.
Rio Tinto becomes sole owner of Diavik Diamond Mine
Diavik scheduled to shut down in 2025
Rio Tinto is now the sole owner of one of Canada's biggest diamond mines.
The company announced Thursday it has completed a transaction to acquire Dominion Diamond Mine's 40 per cent share of Diavik Diamond Mine, located about 300 kilometres northeast of Yellowknife.
The transaction was approved by the Court of Queen's Bench of Alberta on Tuesday.
In a news release, Rio Tinto said it acquired all remaining Diavik assets held by Dominion, including unsold Diavik production and cash collateral held as security for Diavik's future closure costs.
"In return, Rio Tinto has released Dominion and its lenders from all outstanding liabilities and obligations to fund the operations or closure of the joint venture," it read.
The transaction comes after Rio Tinto previously indicated it was not interested in any part of Dominion Diamond Mines.
Dominion Diamond Mines filed for insolvency protection in April 2020.
The two companies then became entangled in a lawsuit over the mine's operating costs.
A spokesperson from Rio Tinto told CBC News in an email that Diavik "continues to operate as normal."
NWT & Nunavut Chamber of Mines executive director Tom Hoefer says the timing of the transaction is good for Rio Tinto because the diamond market is rebounding again after a "big COVID hit last year."
"This gives [Rio Tinto] 100 per cent control of the sale of the stones and of course, they're 100 per cent responsible for cleaning up the mine site which is a work in progress as we speak," he said.
The mine is scheduled to close in 2025.
In the release, Rio Tinto's chief executive of minerals Sinead Kaufman was quoted as saying Diavik will "now move forward with certainty" while "making a significant contribution to the Northwest Territories."
The development comes a week before Diavik president and chief operating officer Richard Storrie is scheduled to deliver an update on the Diavik Mine at a virtual geoscience forum organised by the NWT & Nunavut Chamber of Mines, the government of the Northwest Territories and the Canadian Northern Economic Development Agency.
Corrections
- A previous version of this story said Rio Tinto's chief executive Sinead Kaufman is scheduled to deliver an update on Diavik mine at a geoscience forum next week. In fact, Diavik president and chief operating officer Richard Storrie is scheduled to deliver the update.Nov 18, 2021 4:11 PM CT
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