Dominion says no contact with Washington Corp after $1.1bn takeover bid

Winter ice road to the Ekati and Diavik diamond mines. (Image courtesy of Dominion Diamond.)

Dominion Diamond (TSX, NYSE: DDC), which put itself up for sale last month after receiving a $1.1 billion takeover bid from US billionaire Dennis Washington, has not heard back from the privately held US conglomerate ever since.

The Canadian diamond miner has repeatedly offered to engage with Washington Corp on “customary terms,” but that has not happened yet, said Dominion Chairman Jim Gowans while discussing Q4 results, Reuters reports.

The company, the world’s third largest producer of rough diamonds by value, has already created a special committee and is working with TD Securities to explore, review and evaluate a range of options for maximizing shareholder value.

Dominion has repeatedly offered to engage with Washington Corp on “customary terms,” according to Chairman Jim Gowans, but that has not happened.

Those alternatives, as the company informed, include selling the firm to another diamond miner, which according to one person with knowledge of the strategy, would likely be another Canadian company.

Dominion is said to be looking to secure a deal with fellow Canadian diamond miners, a source familiar with the matter who wishes to remain anonymous told last week.

While the company has not replied to requests for more information on the matter, previous media reports had named Stornoway (TSX:SWY), a small-size firm that recently opened its Renard mine in Quebec, as one of the companies interested in a potential merger with Dominion Diamond.

This is not the first time Dominion explores a sale. In Dec. 2015, it launched a similar process, which didn’t result in any deal.

This week, the miner reported fourth-quarter net income of $5.6 million, compared to loss in the same period of 2016.

However, it registered increased low-value rough diamond output at its two iconic mines, Ekati and Diavik, in Canada’s Northwest Territories, which resulted in an average price per carat sold in fiscal 2017 of $87, the company said, as compared with $177 in fiscal 2016.

Weak global diamond prices are not the only challenge Dominion Diamond has had to face in the past year. The company was also hit by sudden events, including the death of the company’s founder, Robert Gannicott, and a fire at Ekati that suspended processing for three months and cost the miner around $20 million in repairs.

In January, it announced that its chief executive officer Brendan Bell was leaving the company due to personal reasons related to the company’s planned move of headquarters to Calgary from Yellowknife.

The move, expected to be completed by mid-2017, follows a similar decision by De Beers Canada, which moved its headquarters from Toronto to Calgary in July last year.

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