Struggling miner Dominion Diamond Mines, which filed for insolvency protection last month, has reached an agreement to sell substantially all its assets in a transaction that will allow mining operations at Ekati to resume and avoid bankruptcy.

The company signed a letter of intent (LoI) with an affiliate of The Washington Companies, under which an entity to be managed by Washington will acquire Dominion’s assets for $126-million in cash and the assumption of substantially all its operating liabilities.

Washington has also agreed to provide Dominion up to $60-million in short-term debtor-in-possession (DIP) financing, which will provide it with sufficient liquidity to fund business operations and other expenses through the closing of the sale of Dominion, including ongoing obligations to employees and suppliers of goods and services.

Dominion says the proposed sale will allow the company to recall its furloughed workers as the spread of Covid-19 subsides and diamond markets reopen. It will provide assurance to Dominion’s employees, suppliers and the communities in the Northwest Territories that Ekati will continue to operate into the future.

The transaction will put Dominion in a position to pay or meet obligations owed to employees, including pension obligations, and to remain a significant employer and corporate citizen in the Northwest Territories.

“Dominion continues to believe in the long-term viability of its assets and expects to emerge from the CCAA [Companies’ Creditors Arrangement Act] process stronger and better able to deliver value to all stakeholders, including the government and citizens of the Northwest Territories,” the company states.

Under the LoI, an entity managed by Washington will serve as the “stalking horse” bidder for Dominion’s assets, and its bid will be subject to a court-supervised bidding process designed to achieve the highest, or otherwise best, offer, including an auction if necessary.

Dominion expects the sale process to move quickly and close in the coming 90 to 120 days.

The company says the proposed asset purchase agreement for the purchase of substantially all the assets of Dominion will be subject to certain conditions, including Dominion reaching a separate agreement with Rio Tinto regarding the Dominion/Rio Tinto joint venture at the Diavik diamond mine on terms that are acceptable to Washington.