Dominion to buy out Fipke, Stornoway funded to production, Mountain Province cashed up
by Greg Klein
Diamonds obviously evoke wealth as well as beauty. But it’s not just the jewellery that attracts money. Some of the projects that would produce the stones have been drawing in deep-pocketed investors, as shown by three recent deals involving Dominion Diamond TSX:DDC, FipkeCo, Stornoway Diamond TSX:SWY and Mountain Province Diamonds TSX:MPV.
Along with Stewart Blusson, Chuck Fipke proved instrumental to the birth of diamond mining in Canada. Each of them held onto part of their Ekati discovery, the country’s first diamond mine. Now Fipke has agreed to sell his interest in the Northwest Territories project to majority owner Dominion Diamond. The company will pay “a price equivalent to the price paid to BHP Billiton [NYE:BHP] in 2013 for its interests”—which would bring Fipke’s company about US$67 million, according to a July 9 statement.
Ekati consists of the Core zone, part of which is currently mined, and the Buffer zone. Fipke’s FipkeCo and Blusson each hold 10% of Core, with Dominion holding the rest. FipkeCo holds 10% of Buffer, along with Dominion (58.8%) and Archon Minerals TSXV:ACS (31.2%).
FipkeCo would get $50 million for its Core stake and $17 million for its part of Buffer. Both amounts are “subject to adjustments to reflect joint venture contributions and distributions since June 30, 2012, as well as interest from that date,” Dominion stated. The company may pay part of the Core price in shares.
Dominion’s Core purchase might be reduced to 8.89% if Blusson retains his right in respect of FipkeCo’s interest. If Archon exercises its right in respect of FipkeCo’s Buffer interest, Dominion’s Buffer acquisition would amount to 6.53%.
Dominion anticipates closing the transactions by September.
Although the sale “ends Fipke’s “financial involvement with Canada’s first diamond mine, his contribution to its discovery and success goes well beyond that,” stated Dominion chairperson/CEO Robert Gannicott. “The history of Canadian mining is full of stories of accidents of fate leading to discoveries but the discovery of diamonds in the Slave Geological Province is a story of years of dedicated technical work led by a focused technical expert with unwavering belief in the outcome.”
The history of Canadian mining is full of stories of accidents of fate leading to discoveries but the discovery of diamonds in the Slave Geological Province is a story of years of dedicated technical work led by a focused technical expert with unwavering belief in the outcome.—Dominion Diamond chairman/CEO Robert Gannicott on Chuck Fipke’s role in mining history
Dominion also holds a 40% stake in another Lac de Gras-region diamond mine, Diavik. A subsidiary of Rio Tinto NYE:RIO holds the rest and acts as operator. The region’s third diamond mine, De Beers’ Snap Lake, was the giant’s first mine outside of Africa. That company also operates Canada’s fourth diamond producer, Victor in northern Ontario.
News of the Fipke buyout follows Stornoway Diamond’s July 8 closing of a deal to fund its Renard project in Quebec through to production. The C$946-million package reflects “the largest-ever project financing package for a publicly listed diamond company.”
The money comes from “a combination of senior and subordinated debt facilities, equity issuances, an equipment financing facility with Caterpillar Financial and the forward sale of diamonds,” Stornoway added.
Taking part in the deal are Orion Mine Finance, la Caisse de dépôt et placement du Québec and subsidiaries of Investissement Québec. The province’s involvement reflects the government’s policy of investing in resource development.
Stornoway has also raked in C$464 million from “public and private offerings of subscription receipts and the private offering of convertible debentures … to allow the immediate commencement of project construction,” the company stated.
Renard, which would be Quebec’s first diamond mine, is scheduled for commissioning in December 2015 and commercial production by June 2016. (July 10 update: The company now states commissioning will begin in late 2016 and commercial production in Q2 2017.)
Late last month Mountain Province Diamonds closed a C$45.5-million private placement that had originally been offered at $35 million. Proceeds will go to the Gahcho Kué project in the Northwest Territories, a 49%/51% JV with De Beers considered “the world’s largest and richest new diamond development project.” Production’s slated for the second half of 2016. Last week Prima Diamond TSXV:PMD announced a 42,000-hectare acquisition immediately south.
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