Court Appoints Receiver For Yellowknife Diamond Cutters
June 10, 04
An interim receiver has been appointed at Yellowknife's two largest diamond cutting companies, throwing into doubt whether the region can be home to a successful diamond polishing industry.
The receiver has been appointed for Sirius Diamonds Ltd and Arslanian Cutting Works (NWT) Ltd at the request of the Northwest Territories government, which had guaranteed a total of US$12.6 million in loans to the two companies.
The government said it had received a demand from the Royal Bank for immediate payment of the loans, which it claims are in default. Sirius owes $5.9 million while Arslanian owes $6.8 million.
The diamond manufacturing companies have 30 days to repay the government or seek an extension from the court.
If they fail to pay the money, the court will decide the next action, which could include putting the firms in full receivership, meaning the companies could be sold to interested parties as going concerns, or the assets, including the diamonds on the premises, sold off.
A spokesperson for the NWT government and the companies involved were not immediately available for comment.
The appointment of an Interim Receiver was “a normal business precaution in these types of circumstances”, the NWT government said in a news statement. “The Interim Receiver will not interfere with the normal operations of the companies who are free to continue business operations.”
The companies have denied they are in arrears with their loans. Senior officials at both firms have said the government may have been panicked into making the decision after a local tour bus operator went bust owing the government $1.4 million.
NWT Finance Minister Floyd Roland said the government was concerned over the companies' financial positions and had no choice but to protect itself.
He denied the move would lead to the death of the territory's secondary diamond industry, citing two other companies, Tiffany & Co and Canada Dene Diamonds, who were doing well without any loan guarantees.
The government would be re-examining its policies on supporting the industry, however. “It doesn't mean we're pulling back our support, but it's something we have to look at.”