Battle continues over Dominion's share of Diavik diamonds

A dispute between the two biggest players in the N.W.T.'s diamond industry continues as one of them struggles through bankruptcy.

Diavik Diamond Mines Inc. wants to sell off tens of millions of dollars' worth of diamonds it holds as collateral for money it is owed by Dominion Diamond Mines. Dominion filed for creditor protection and is in the process of having its assets sold off.

The debt stems from Dominion's partnership with Diavik Diamond Mines Inc. (DDMI) in the operation of the biggest diamond mine in Canada, Diavik. Under a joint venture agreement with DDMI, a subsidiary of corporate giant Rio Tinto, Dominion must cover 40 per cent of the operating costs of Diavik and, as a result, is entitled to 40 per cent of the diamonds mined at Diavik.

But Dominion has not been paying those bills since it filed for creditor protection in April. According to court documents filed by DDMI, the bill now stands at $119.5 million plus interest of $2.37 million.

DDMI has been holding Dominion's share of Diavik diamonds at a building in Yellowknife. It applied to transport them to Antwerp to sell them to pay off the debt. On Nov. 4, the Calgary judge overseeing Dominion's creditor protection case agreed to allow the sell-off.

But the judge's order was based on an estimate of the value of the diamonds. The judge said if the appraisal finds the diamonds are valued at more than the debt owed, the excess diamonds must be turned over to Dominion.

DDMI is appealing the decision. It says appraisals done in the past for the purpose of determining royalty payments have historically been higher than the amounts diamonds have actually sold for. It also says the appraisal would not take into account the costs it would incur to clean, market, transport and sell the diamonds. It also argues that it should be able to sell off the gems and recover its debt before any excess is returned to Dominion.

Diavik Diamond Mines has asked for the matter to be heard in court this week, but a date has yet to be set.