Dominion Diamond stock tumbles following Ekati process plant fire
'It's essentially going to be a lost quarter of production for this calendar year,' says industry analyst
Dominion Diamond Corporation's stock price has taken a hit due to the temporary closure of its processing plant at the Ekati mine.
On Wednesday, Dominion announced that repairs at Ekati's processing plant after a fire last week will take three months. The fire broke out in the plant on June 23 during a planned outage. No one was injured and the fire was extinguished the same day.
As of Wednesday night, Dominion Diamond's stock had fallen nearly 11 per cent since the news of the fire broke.
The Brexit vote happened on the same day and has had a major impact on markets, but New York-based diamond industry analyst Paul Zimnisky said he attributes "almost all" of the drop in stock price to the fire and news of the processing plant shutdown.
"It's definitely going to affect the bottom line," he said.
"Initially when I heard the news I was hoping it was only going to be a couple days or at most a few weeks of outage. So I think three months is definitely significant enough to impact earnings for the quarter and for the year."
Dominion Diamond's stock has fallen nearly 39 per cent since this time last year.
'It's not permanent'
In a news release, the company said it will be cutting costs during the plant's closure. It also announced it will be temporarily laying off some workers. Dominion Diamond isn't saying how many people will be laid off or for how long.
One of the company's contractors, Procon Mining, said it found out about the layoffs early Wednesday morning and has been meeting with Dominion Diamond to find out just what impact the shutdown will have on its workers.
Zimnisky said many investors had high hopes for the company this year because it was ramping up production with the recently completed expansion of its Misery pipe. But the processing of diamonds from that pipe will now have to be pushed back three months.
"It's essentially going to be a lost quarter of production for this calendar year. However the company also has the Diavik mine which is unaffected by this," Zimnisky said.
"But I think the most important take away is that this is temporary. It's not permanent."
The company also has processed diamonds stockpiled that it could sell over the next three months to help offset the effects of the processing plant closure.
Dominion Diamond Corporation has not returned calls for comment.