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.
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.