Transaction gives the US-based buyer full ownership of Canada’s Ekati diamond mine and a 40% stake in Diavik, which is operated by Rio Tinto.
Dominion Diamond Corp. Mining News
Patrick Evans will become the new CEO once a deal to purchase the Canadian diamond company closes later this year
The US company plans to operate Dominion as a standalone business, appointing a new chief executive based in Canada.
The project, called Misery Deep, will require an investment of $6 million in 2018, $69 million in 2019 and $19 million in 2020.
The company has repeatedly offered to engage with Washington Corp on "customary terms," according to Chairman Jim Gowans, but that has not happened.
Strategy is part of Dominion's goal of securing the best deal possible for all its shareholders.
Montana-based Washington Co is offering 36% above the closing price of the Canadian miner’s shares on Friday.
The target group was the the top diamond consumer in 2015, a year in which most commodities plummeted, hitting the mining industry very hard.
More than 500 unionized workers are expected to ratify the agreement in an upcoming vote scheduled for March.
Brendan Bell, who has also resigned to Dominion's board, has agreed to stay on as CEO until June 30 to ensure a smooth transition.
Global rough diamond production will reach its peak in only three years before entering into a supply deficit by 2020, two separate reports show.
Company says it was forced to lay off employees from across the business given "current market conditions."
The move comes on the heels of a similar decision by De Beers Canada, which moved its headquarters from Toronto to Calgary in July.
This was supposed to be a key year for Dominion, especially with the commencement of mining at the company’s rich Misery Main pipe at its Ekati mine.
The Chidliak mine, in Canada’s Nunavut, is expected to produce around 12 million carats during its 10-year lifespan.
Developing the Jay pipe will help keeping the mine in production until 2033.
While Dominion Diamond has pushed construction of Ekati’s new Jay pipe to 2018, Rio has said that a denial of a request to change its water licence could have an adverse impact on Diavik.
Project could help keep Ekati producing diamonds until 2033, or 13 years later than the expected end of its mine life.
The miner lost $11.6 million in the fiscal 2016, compared to a profit of $170.3 million in 2015.
The board's recommendation still needs to be approved by Canada’s Northwest Territories authorities.
The miners concerted effort to limit global diamond supply is forecast to be offset by stable Russian production, new mines, and production increases by Dominion Diamond and Petra Diamonds.
Robert Gannicott's replacement as chairman will be Jim Gowans, a former DeBeers Canada CEO and most recently the co-president of Barrick Gold,.
Investors have publicly called on the company’s independent directors to deal with the “misguided policies and missed opportunities” that have hurt their investment.
The company hopes to begin mining from the Jay pit before Ekati's existing reserves run out in 2020, and so avoid laying off workers.
But some believe main challenge will be falling prices and wholesalers difficult access to credit to purchase rough diamonds.