SOMBA K'E/YELLOWKNIFE
Dominion Diamond Corporation's board has decided to go ahead with an expansion of its majority-owned Ekati mine, a project expected to extend the life of the mine to 2033.

The Jay Project, an expansion of the Ekati diamond mine, is expected to take place at this ice-covered lake northeast of Yellowknife. - photo courtesy of Dominion Diamond Corporation

The US$647 million Jay Project approval, announced Wednesday, comes after the company's completion of a feasibility study.

"We are very pleased with the Jay feasibility study," said Dominion CEO Brendan Bell on a conference call with investors.

"I think I can say with confidence that the future for Dominion and its shareholders is bright."

Construction at the site about 300 kilometres north of Yellowknife would take place 2017 through 2021 with first ore removed in 2022.

The optimistic tone came as Dominion has, in recent months, been dealing with financial losses attributed to low diamond prices, a shareholder revolt that said the company's share price suffered because of "misguided policies and missed opportunities" and a fire at its process plant at Ekati.

Earlier this week, Dominion announced the repairs would cost $25 million and take about three months, resulting in about 330 temporary layoffs.

The company also announced Wednesday the departure of its chief financial officer, Ron Cameron, expected on July 15.

It wasn't clear whether he was let go or left voluntarily, though Bell thanked him for his "critical" role in building a Yellowknife-based corporate headquarters.

Cara Allaway, the company's vice-president group controller, will take over as interim CFO.

The company also completed a strategic review of its operations, concluding it should focus on its core business, which also includes the Diavik diamond mine in the same region.

It's selling a downtown Toronto office building which is expected to be complete by the second half of the 2017 fiscal year.

It will also conduct a buyback more than 6.1 million shares, representing about 7.2 per cent of issued and outstanding shares, over the next year.

"The company believes that from time to time, the underlying value of its assets is not reflected in the market price of its common shares, and therefore purchases of the company's common shares may represent the best use of shareholder's capital," a news release states.

The company's stock has dropped by a third from this time last year and ended at $11.90 on Wednesday, down two cents.

Price increase forecasted

The company projects diamond prices to climb 2.5 per cent annually during the life of the mine, driven in part by long-term growth of sales in China and India.

"We're strongly of the view that Jay is not only an excellent project for Dominion but it is also the right project at the right time for the diamond market," Bell said.

Jay is a kimberlite pipe about 25 kilometres from the main Ekati mine infrastructure which the company calls the "most significant" undeveloped deposit at the Ekati site. It is underneath Lac de Sauvage about 1.2 kilometres from the shoreline. Much of the projected spending would go toward building a dike to hold back the water, and pumping, following by mining.

The project received ministerial approval of the environmental assessment in May. It has applied for land and water use permits which it expects to be approved in 2017.

The company applied for permits to build a 4.5 kilometre long all-season road to the lake. If approval is quickly granted, it expects construction of the road to begin later in 2016.

Previously the company had reported the feasibility study and other changes at Ekati mean construction of Jay doesn't have to begin as soon as expected. The extra year between when it was previously expected to start construction and the new time will be used to cut costs across the company, Bell said without elaborating on what that could entail.

The expansion will be funded with cash-on-hand and other expected income resulting from continued mine operations, meaning it won't be taking on debt.

Announcement welcomed

Approximately 40 per cent of the territory's economy is directly or indirectly linked to mining.

"The approval to invest in the Jay Project is great news for the NWT," Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines, stated in an e-mail. "Ekati is the largest NWT mine with over 1,400 workers and as such is a major contributor to the economy."

Premier Bob McLeod, also minister of Industry, Tourism and Investment, said in an interview the announcement is good for the territory.

"It means that diamond mining will be around for some time, which we feel is a good thing," McLeod said.

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