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Dominion Diamond sees sales fall
Company reports $101.4-million loss, dismal third quarter results don't phase CEO

Jessica Davey-Quantick
Northern News Services
Friday, December 23, 2016

It wasn't a happy quarter for Dominion Diamond Corporation.

Looking at the three months ending on Oct. 31, the company saw sales fall by U.S. $42.3 million from the same period last year. In the nine months preceding October of this year, Dominion saw sales fall by US $101.4 million from 2015, and sales from the Ekati segment decreased $110 million from the third quarter last year.

But representatives from Dominion are looking on the bright side.

"Although it is not a slump, earnings and cash flow have been impacted by the fire at the process plant (which is now behind us) and a temporary decrease in the market for some lower priced diamonds," stated Laura Worsley-Brown, external relations senior adviser for Dominion Diamond Corp.

She explained the decrease wasn't as sign of a downturn but rather the effect of lower quality diamonds being available for sale while the Ekati process plant was closed this summer, due to a fire on June 23.

It's been a rough year overall for Dominion, which temporarily laid off 330 people after the Ekati fire, and expensed US $22 million in mine standby costs as a result.

Progressive rehiring at the plant began in September, but Dominion announced that by mid-2017 it would relocate its head office from Yellowknife to Calgary as a cost cutting measure.

Dominion estimates moving the office - and the 100 jobs with it - south will save about $19 million.

Diavik offered mixed results in the third quarter as well, with tonnes processed rising, thanks to good ore availability, but the quality of that ore fell because of increased underground dilution from granite sloughing from the open pit walls.

But CEO Brendan Bell has high hopes that 2017 will leave 2016 in the glittery dust.

"From a financial performance perspective, the third quarter contained the first sale of commercial production from (Ekati mine's) high-value, high-margin Misery Main open pit. While the overall level of rough diamond sales in the quarter was low, the positive influence of Misery Main on our margins has begun to show on our financial statements," he said during a conference call on Dec. 9.

On tap for the new year is also the Misery Deep drill program, expected to be completed in early January, and pre-stripping at the Sable site is also expected to begin ahead of schedule, as early as this time next year.

Jim Pounds, executive vice president, Diamonds at Dominion said one thing that could help Canadian mines is the reputation for ethically sourced diamonds. The demand for cheaper diamonds, especially in Asia, was a factor in the third-quarter results but Pounds said in the Dec. 9 conference call that consumers are still willing to spend if it means knowing where their diamonds come from.

"We are very encouraged by the continuing demand for our CanadaMark diamonds and becoming increasingly evident that the high level of environmental stewardship and the single source provenance of a CanadaMark diamond resonates well with retail diamond consumers," said Pound.

Despite the losses this quarter, Bell is confident a good Christmas season will put the company firmly back on track.

"The bottom line is our outlook for growth and diamond prices in unaffected, supported by growing demand and constrained supply," stated Bell.

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