Dominion, Stornoway in Merger Talks: Report

RAPAPORT… Dominion Diamond Corporation and Stornoway Diamond
Corporation have held discussions over a merger, Reuters reported this week, as
Dominion continued to denigrate a separate takeover offer from the Washington Companies.

The merger talks cover the possibility of Stornoway chief
executive officer Matt Manson (pictured) filling the soon-to-be vacant CEO role at
Dominion, the report said. Discussions started in January, Reuters cited one
source as saying, adding that another said talks were still ongoing.

Dominion and Stornoway both declined to comment on the
report.

A union between the two would combine three significant
mining assets in Canada under one roof, with Stornoway having opened the Renard
mine in Quebec last October. Dominion owns the Ekati deposit in the Northwest
Territories and has a 40-percent stake in the region’s Diavik deposit.

The report came as Dominion confirmed it was prepared to
enter discussions with Washington, a diamond-industry outsider that had approached
the miner with a proposal for a $1.1 billion takeover. On Wednesday, Dominion
said Washington had not made a formal offer, and reaffirmed an earlier
statement from Sunday that the approach was “opportunistic” and undervalued the
company.

Dominion also said Washington had demanded a veto on the
choice of replacement for the miner’s CEO, Brendan Bell, who is set to leave by
June 30. Washington, however, insisted it had only requested that Dominion
avoid appointing a CEO during an exclusivity period, according to a letter it
sent to Dominion chairman Jim Gowans and which the mining company released on
Wednesday.

Letters between Gowans and Washington president Lawrence
Simkins indicate “the aggressive and off-market terms and conditions proposed
by WashCorps [Washington Companies],” Dominion argued.

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