Dominion Diamond, Stornoway held merger talks -sources


Reuters

UPDATE 1-Dominion Diamond, Stornoway held merger talks -sources


(Adds details, stock move, context)
    By Nicole Mordant and John TilakVANCOUVER/TORONTO, March 20 (Reuters) - Dominion Diamond
Corp <DDC.TO> <DDC.N> and fellow Canadian diamond miner
Stornoway Diamond Corp <SWY.TO> have held talks about a
potential merger in recent months, people familiar with the
matter said on Monday.
    World No. 3 diamond miner Dominion, target of a $1.1 billion
bid by U.S. billionaire Dennis Washington, and Stornoway, a
small miner with a diamond mine in Quebec, declined to comment.
The people declined to be named as the discussions are private.
    One of the people said the talks were still ongoing.
    The talks include Stornoway's chief executive officer and
president, Matt Manson, becoming CEO of the merged group, one
source said, adding that the discussions on an all-share merger
started in January.
    Dominion, which owns the Ekati diamond mine in Canada'sNorthwest Territories and a 40 percent stake in the nearby
Diavik mine, is looking for a new CEO after announcing on Jan.
30 that Brendan Bell had resigned. [nL1N1FK0RC]
    A union with Dominion would give Stornoway, which owns a
single mine, an avenue for growth, the sources said.
    On Sunday, The Washington Companies, a group of privately
held North American mining, industrial and transportation
businesses founded by Dennis Washington, announced that it had
made a $1.1 billion all-cash proposal for Dominion. [nL2N1GX0P3]
    Dominion said in a statement late Sunday that its board had
considered Washington's unsolicited proposal, but the terms of
the proposed talks were unusual and unacceptable. [nBw3wdBHqa]
    The Washington offer comes at a time when some analysts are
talking of diamond supply peaking as big new deposits become
harder to find and mines, often in remote regions, take longer
and are more expensive to build.
    Shares in Dominion surged as much as 26 percent on Monday on
the Washington proposal to a session high of $12.53 on the New
York Stock Exchange. They closed at $12.20 for a gain of 23
percent, below the $13.50 a share Washington offered.
    Lawrence Simkins, president of Missoula, Montana-based
Washington, said in Sunday's statement the group remained "fully
committed to completing this transaction."
    The group declined to comment on Monday when asked if it
would take its offer directly to Dominion shareholders.
    Washington's proposal puts Dominion into play and brings the
"long-awaited kickoff of Canadian diamond consolidation,"
brokerage Canaccord Genuity said in a note to clients.
    In addition to Washington, there are several other "logical"
potential suitors for Dominion, including global mining giant
Rio Tinto <RIO.L> <RIO.AX> and Anglo American-owned <AAL.L>
diamond giant De Beers, Canaccord said.
    Rio is already a partner of Dominion, owning 60 percent of
the Diavik mine. De Beers has diamond mines and exploration
interests in Canada.
    Both Rio and Anglo declined to comment.
    "There is certainly the potential for lots of people to take
a look at (Dominion). Whether that translates into meaningful
action I would be somewhat more cautious on," BMO analyst Edward
Sterck said.
    Large global miners are still slashing heavy debt loads as
they emerge from a deep commodities downturn, he said.

 (Reporting by Nicole Mordant in Vancouver and John Tilak in
Toronto; Additional reporting by Barbara Lewis in London and
Susan Taylor in Toronto; Editing by Denny Thomas and Leslie
Adler)
 ((nicole.mordant@thomsonreuters.com; +1-778-374-3854; Reuters
Messaging: nicole.mordant.thomsonreuters.com@reuters.net))

Keywords: DOMINION DIAMOND M&A/STORNOWAY DIAMOND (UPDATE 1)



This article appears in: Stocks , World Markets , Stocks
Referenced Symbols: AAL , DDC , RIO


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