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Fire Drags Dominion to Operating Loss

Dec 12, 2016 9:27 AM   By Rapaport News
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Dominion Diamond Corporation reported somber third fiscal quarter results as a fire at its Ekati mine in Canada led to $22.4 million in fixed or standby costs of running the mine.

Sales slumped 29 percent to $102.7 million in the three months that ended October 31, pushing the miner to report an operating loss of $9.1 million versus an operating profit of $9.5 million a year ago.

Dominion shut the processing plant at Ekati following a fire on June 23 that resulted in sales from the mine dropping 38 percent to $54.8 million. Operations recommenced to full capacity by September 21. A carryover of diamonds with a lower average value from both Ekati and the Diavik mines in Canada from the second quarter also hit revenues.

The Ekati processing plant started “slightly ahead of schedule and within budget,” said Brendan Bell, Dominion’s chief executive officer.

Sales also fell because of lower demand for rough diamonds in the third quarter as manufacturing in India slowed for the Diwali holiday. Prices fell 5 percent on average sequentially, reflecting this seasonal weakness and soft demand for lower-priced goods.

Any potential for a recovery was nipped in the bud after India decided to invalidate INR 1,000 and INR 500 currency notes as part of a demonetization policy, Dominion said. Reduced liquidity is expected to result in weaker-than-usual demand early next year – a time of year typically used for restocking following holiday sales, the company explained.

Despite lower sales, the company said its net income grew to $28.8 million from $7.2 million a year ago because of a one-time pre-tax gain of $44.8 million on the sale of the company’s Toronto office.

In the first nine months, sales declined 19 percent to $441 million and the miner reported a net loss of $5.4 million, compared with a profit of $1 million a year ago.
Tags: Brendan Bell, Canada, Demonetization, Diavik mines, Diwali, Dominion, Dominion Diamond Corporation, ekati, Ekati mine, India, Rapaport News, rough demand, toronto
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