SOMBA K'E/YELLOWKNIFE
A group of Dominion Diamond investors are alleging the company's "misguided policies and missed opportunities" are the reason for its drop in share price.

In a document filed with the U.S. Securities and Exchange Commission on Monday, the group of investors, led by the Toronto-based hedge fund K2 & Associates Investment Management Inc., say Dominion's share price has "suffered excessively and unnecessarily."

The group says its common shares total 5.4 per cent.

The document states the group of investors intends to meet with Dominion's board of directors to discuss "among other things, (Dominion's) corporate governance; overall business strategy; business performance; capital allocation priorities; project priorities; cost containment; diamond marketing; compensation policies and practices; corporate disclosure practices; and shareholder engagement."

Notably, the group of Dominion investors also wants to take an active role in the future of the company, stating they "may formulate plans or proposals regarding (Dominion) or its securities."

Established in 1998, K2 & Associates Investment Management currently has a staff of 14 overseeing its two investment products - the K2 Principal Fund L.P. and K2 Principal Trust. The Trust requires a minimum investment of $25,000.

K2 Portfolio manager Josef Vejvode finished the statement with a call to the independent members of Dominion's board of directors stating they "must immediately undertake a strategic review" and saying "time is of the essence."

"There is an immediate opportunity for us to work together to create value for all of the Company's shareholders" he stated. "Inaction will only result in the continued erosion of shareholder value."

On Dec. 22, Dominion Diamond issued a news release acknowledging the filing.

"Dominion looks forward to an open dialogue," it stated. "The Company's board and management team are committed to creating value for our stakeholders and we will continue to take actions to accomplish this goal and position the Company for future growth and success."

When asked for further comment, Dominion spokesperson Laura Worsley-Brown said, "At this time, we do not have any further comment beyond the press release."

After the group of investors filed the document, shares of Dominion Diamond on the Toronto Stock Exchange rose significantly. By 2:30 p.m. Eastern Standard Time, the stock hovered around $10.01, an increase of $1.79 or 21.78 per cent.

The move comes a few weeks after the company reported its third quarter results on Dec. 10 in what CEO Brendan Bell called a "challenging diamond market."

Sales, gross margin, operating profit and earnings per share for the three month period ending on Oct. 31 all plummeted compared to the same time last year.

Sales dropped to $145 million this year from $222.3 million in the same period in 2014, a decline of $77.3 million or 65 per cent.

The company's operating profit fell to $7.1 million from $67.5 million, a drop of $60.4 million or 89.5 per cent.

In a news release, the company stated that "in light of current market conditions the company is reassessing working capital, development and sustaining capital requirements and is continuing to look for opportunities for cost savings in both operating and selling, general and administrative costs."

Bell officially took over the role of CEO earlier this year on July 31 after Robert A. Gannicott stepped down following a medical leave.

Gannicott rejoined the company in the position of non-executive chairman. Bell had been the Dominion's acting CEO since November last year.

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