An extensive fundamental analysis of Dominion Diamond Corporation (DDC) for investors is complicated by its corporate history.
Crucially, Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) was acquired and taken private by The Washington Companies in November 2017.
Therefore, the company no longer trades publicly under the DDC ticker. Any fundamental analysis must focus on its historical operations before the acquisition, the reasons for the privatization, and the subsequent fate of its key assets.
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| fundamental analysis of Dominion Diamond Corporation (DDC) |
The Former Dominion Diamond Corporation: A Fundamental Retrospective
Dominion Diamond Corporation was a Canadian diamond mining company, once the world’s third-largest producer of rough diamonds by value, with a focus on low political risk environments in Canada's Northwest Territories.
1. Business and Asset Analysis (Pre-Acquisition)
| Asset | Dominion's Interest | Status/Significance |
| Ekati Diamond Mine | Controlling Interest (80% initially, later 100% after buying out Fipke's 10%) | Canada’s first surface and underground diamond mine. The flagship asset, providing the majority of the company's rough diamond supply. |
| Diavik Diamond Mine | 40% (Joint Venture with Rio Tinto) | One of Canada's largest diamond mines. Provided stable, high-quality production. |
| CanadaMark™ | Brand Ownership | DDC marketed its ethically sourced and premium Canadian diamonds under this brand, adding a premium value proposition. |
Key Operational Drivers:
Production Volume and Grade: The core fundamental driver was the production schedule and the grade (carats per tonne of ore) from Ekati and Diavik, which dictated revenue potential.
Mine Life Extension: Crucial for long-term valuation was the development of new projects, such as the Jay and Fox Deep kimberlite pipe extensions at Ekati, which promised to extend the mine's operational life for decades.
Geographic Risk: Operating in Canada provided a significant fundamental advantage due to the low political risk compared to other major diamond-producing regions.
2. Financial Performance & Valuation (Historical)
As a publicly traded entity, DDC's fundamental valuation was primarily driven by standard mining and diamond industry metrics:
Revenue and Profitability: Revenue depended directly on carats sold and the achieved rough diamond price. Operating profits were measured against high fixed costs associated with remote Arctic mining.
Cash Flow: Operating Cash Flow (OCF) was paramount for funding the significant Capital Expenditures (CapEx) required for mine development (e.g., underground mining conversions and new pipe development). The company's ability to generate Free Cash Flow (FCF) was key to its valuation.
Rough Diamond Price Cycles: As a commodity producer, DDC's financials were highly sensitive to global rough diamond prices, which are notoriously volatile and subject to global luxury goods demand. Periods of weak pricing historically pressured margins.
Valuation Multiples: Traditional metrics like Price-to-Earnings (P/E) and Enterprise Value-to-EBITDA (EV/EBITDA) were used, but Net Asset Value (NAV) and Discounted Cash Flow (DCF) analyses, based on diamond reserves and future production estimates, were often considered more relevant by mining analysts.
3. Management and Strategy
The management team’s long-term strategy centered on:
Maximizing Ekati’s lifespan through phased development of new resources like the Jay project.
Maintaining a strong partnership with Rio Tinto at Diavik.
Focusing on cost discipline to offset the cyclical nature of diamond prices.
Promoting the CanadaMark brand for value-added sales.
The Critical Event: Acquisition and Privatization
The company's trajectory as a publicly traded stock concluded with a definitive event:
Acquisition by The Washington Companies (2017):
In July 2017, The Washington Companies, a US-based private industrial conglomerate, announced an agreement to acquire all outstanding common shares of Dominion Diamond Corporation for US$14.25 per share in cash, valuing the equity at approximately US$1.2 billion.
The Premium: This offer represented a significant premium (about 44% over the stock price before the initial bid), which the board unanimously recommended to shareholders.
Rationale: Washington Companies, known for taking a long-term view in capital-intensive industries like mining, saw intrinsic value in Dominion's long-life, world-class assets, particularly the ability to fund and develop the future phases of the Ekati mine, such as the Jay and Fox Deep projects.
The Outcome: The acquisition closed in November 2017, and Dominion Diamond Corporation ceased to be a publicly traded entity.
Post-Acquisition Developments (Beyond the Stock)
Following privatization, the entity was rebranded as Dominion Diamond Mines. It faced new challenges that further influenced the fate of its assets, which is essential context for any historical fundamental analysis:
Financial Distress (2020): Amid a slump in the global diamond market and the disruption caused by the COVID-19 pandemic, Dominion Diamond Mines filed for creditor protection (insolvency) in April 2020. This revealed that the company had accumulated significant liabilities.
Asset Divestiture (2021/2023):
In 2021, the Ekati Diamond Mine and associated exploration projects were sold to the newly formed Arctic Canadian Diamond Company Ltd. (a consortium of Dominion's former creditors).
In 2023, Burgundy Diamond Mines acquired Arctic Canadian Diamond Company, becoming the new operator and owner of Ekati.
Dominion’s minority interest in the Diavik Mine was also subject to proceedings related to its insolvency.
Conclusion for Investors:
For an investor today, a fundamental analysis of Dominion Diamond Corporation is purely an academic exercise since the stock no longer exists. The former DDC's ultimate demise as a private entity and the subsequent sale of its flagship asset, Ekati, underscore the extreme capital requirements and market volatility inherent in the diamond mining sector.
Investors looking for exposure to the former DDC assets would now need to analyze the current owners, specifically Burgundy Diamond Mines (for Ekati) and Rio Tinto (for Diavik), to assess their respective fundamental risks and opportunities.
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