Dominion Sues Rio Tinto over Handling of Diavik

RAPAPORT... Dominion Diamond Mines has sued joint-venture partner Rio Tinto, alleging that the mining giant breached the agreement by failing to control costs at the Diavik deposit in Canada.Rio Tinto operated the mine significantly over budget despite missing production targets, contributing to Dominion's financial difficulties, according to the lawsuit filed Tuesday in the Supreme Court of British Columbia.Dominion, which owns 40% of Diavik, has been in dispute with Rio Tinto subsidiary Diavik Diamond Mines, Inc. (DDMI), a 60% shareholder, since filing for insolvency in April. It now claims DDMI, which operates Diavik, didn't attempt to mitigate the problems at the mine, and instead asked Dominion to pump cash into the operation.DDMI also failed to provide relevant information about the project when Dominion requested it, even though the two companies were funding it jointly, the lawsuit alleged.The Rio Tinto unit maintained full operations at Diavik during the coronavirus pandemic despite the inability to sell diamonds during the global shutdown, and without consideration of Dominion's circumstances, Dominion said. DDMI knew Dominion couldn't afford to put funds into the joint business because it could not offload its diamond inventory while the Antwerp rough market was closed.Those payments "have drained Dominion's cash reserves and contributed to Dominion's liquidity crisis," Dominion claimed. They will also "negatively impact Dominion's restructuring efforts," the lawsuit added.Dominion accused DDMI of willful misconduct and gross negligence. It seeks damages, costs, and a court declaration that DDMI breached the joint-venture agreement."Rio Tinto has managed the Diavik diamond mine successfully for over 15 years for the benefit of its owners, the Northwest Territories, local communities, governments, employees and suppliers," a Rio Tinto spokesperson told Rapaport News Wednesday."We are confident that we have acted appropriately at all times, and will be vigorously defending these baseless claims by Dominion, just as we continue to protect Diavik's interests in Dominion's insolvency proceedings."Image: The Diavik mine. (Diavik Diamond Mines)